Demat account growth falls to four-quarter low; sees sharpest ever fall

The September quarter saw a record 13.25 million new demat accounts being opened.

The total number of demat accounts continued to grow in the December quarter, but the pace of new account openings witnessed a sharp slowdown, driven by significant market volatility and corrections during the period.

While around 9.77 million new accounts were opened during the quarter, it was the slowest growth in the past four quarters and a steep 26.3% decline – the sharpest ever – when compared to the previous quarter. The September quarter saw a record 13.25 million new demat accounts being opened.

The slowdown coincided with a correction in the Indian equity markets. Both benchmark indices, Sensex and Nifty, posted sharp declines of 7.3% and 8.5%, respectively -- their steepest quarterly drops since June 2022. Broader markets also struggled, with the BSE MidCap and BSE SmallCap indices declining by 6% and 3.5%, respectively, their weakest performance since mid-2022 and March 2023.

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The downturn in equities was driven by global uncertainties, including fears of tariff wars after Donald Trump won the US presidential elections, expectations of fewer Federal Reserve rate cuts, and persistent geopolitical tensions. On the domestic front, weak corporate earnings, slowing economic growth, tight liquidity conditions, delayed government spending, and inflationary pressures further eroded investor confidence.

Another factor contributing to the slowdown is reduced activity in the derivatives market, attributed partly to the new stringent regulations put in place by the Securities and Exchange Board of India (SEBI). According to market participants, these changes have limited the opportunities in the options segment, further dampening investor enthusiasm.

The BSE and NSE combined average daily turnover for the F&O segment reached Rs 280 trillion in December, the lowest since August 2023, marking a 36.56 percent decrease from Rs 442 trillion in November. More importantly, the decline is as high as 48 percent if the December volumes are compared with that of September. Index futures turnover dropped for the second consecutive month, while turnover in stock futures, index options, and stock options declined for three months in a row.

On an overall basis, a total of 185.3 million demat accounts were registered with NSDL and CDSL as on December end, up from 182.05 million the previous month.

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