Demat account additions reach record high riding on Dalal Street rally

The number of demat accounts opened in December totalled over 41.78 lakh, a record account opening.

As markets scale new record highs, there is a surge in new investors opening demat accounts, with December posting the highest ever monthly additions.

According to data from the Central Depository Service and National Securities Depository, the number of demat accounts opened in December totalled over 41.78 lakh, compared to 27.81 lakh a month ago and 21 lakh a year ago. The total demat tally crossed 13.93 crore, up 3.1 percent from a month ago and 28.66 percent from a year ago.

"We anticipate continued growth in demat accounts going forward. With the current count at around 14 crore, it's expected to further increase in the upcoming years" said Rajesh Palviya, an analyst at Axis Securities.

The surge in demat accounts is credited to positive market trends fuelled by the recent state election results, economic progress, improved stock market performance, a buzzing primary market, and favourable listings. The Assembly poll results in five states have fostered confidence in people with a sense of certainty for the 2024 general elections. A decisive NDA mandate is expected to ensure policy continuity, prioritise infrastructure, enhance domestic industry confidence in manufacturing investments, leading to increased financial market activity.

Apart from India elections, there are also hopes of the US Fed refraining from further rate hikes. These factors have injected significant momentum into the market, prompting those who missed the April rally to start opening demat accounts, analysts added.

In 2023, both the Sensex and the Nifty advanced 18.8 percent and 20 percent while BSE MidCap and BSE SmallCap jumped 45.5 percent and 47.5 percent.

Palviya added that the market is expected to remain bullish despite recent volatility and profit-taking. It's advisable for investors to stay invested and consider deploying funds into quality stocks during corrections. Several sectors such as FMCG, IT, chemical, and fertiliser are yet to participate in the rally, indicating potential opportunities in the market. Palvia anticipates the Nifty to potentially reach the 23,500 level.

Few analysts further said the surge in demat accounts followed a wave of profitable IPOs in recent months, enticing widespread participation. Small investors sought to capitalise on these opportunities. Also, mutual funds have outperformed the benchmarks, yielding better returns than traditional savings, attracting both passive and active public interest. "The recognition of a bullish market fuelled the fear of missing out (FOMO), driving the December spike in demat accounts," said an analyst.

Additionally, bank-led brokers attracted a larger customer base by offering three-in-one account facilities amid the booming equity markets, further encouraging investment.

"People who were waiting on the sidelines to participate in markets are now in a hurry. Reaching 20 crs demat account in another 12 months looks achievable," said Prashant Bhansali, director of Mehta Equities.

Analysts expect a continued surge in demat accounts due to greater recognition of equities in investment portfolios. Increased disposable income and savings among millennials have notably driven interest in financial markets. This sustained optimism is expected to persist, showcasing India's appeal as a strong investment destination.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.