New demat account openings slow down in Jan amid market correction

As of January-end, the total number of demat accounts registered with NSDL and CDSL stood at 188.14 million, up from 185.3 million in the previous month.

The growth momentum in new demat account openings is slowing. According to data from depositories for January, while the total number of demat accounts continues to rise, the pace of new additions has declined compared to previous months to a 14-month low.

In January, 2.83 million new demat accounts were opened—the lowest since November 2023—compared to 3.26 million in December. This figure also falls below the 2024 monthly average of 3.84 million. As of January-end, the total number of demat accounts registered with NSDL and CDSL stood at 188.14 million, up from 185.3 million in the previous month.

Siddarth Bhamre, Head Institutional Research of Asit C Mehta Investment Intermediates Ltd,  attributes the earlier surge in demat account openings to the post-COVID stock market boom, which saw a wave of new investors entering the market. Many individuals even transitioned to stock trading as their primary occupation during the prolonged bull run in Indian equities.

From COVID until last October, new investors reaped substantial gains amid soaring benchmark and broader indices. However, since October, the market has been in a correction phase, particularly in the broader segments, with no clear signs of recovery yet, Bhamre added.

Since October, the Sensex and Nifty have declined by around 8 percent each, while the BSE MidCap and BSE SmallCap indices recorded steeper losses of 12.8 percent and 12.2 percent, respectively.

The downturn has been driven by weak corporate earnings, slowing economic growth, tight liquidity conditions, delayed government spending and inflationary pressures, all of which have eroded investor confidence. Global factors such as geopolitical tensions and tariff wars have further dampened sentiment.

Manish Chowdhury, head of Research at StoxBox, notes that many investors who entered the market in recent months attempted to average their positions but ultimately exited at losses, further contributing to the slowdown in new demat account openings.

Additionally, new regulations issued by the Securities and Exchange Board of India for the derivatives market have led to a significant drop in trading volumes, prompting retail investors to exit derivatives trading and reducing the demand for new accounts. The heightened market volatility has also played a role, with frequent spikes triggering stop-losses or forcing investors to exit positions at losses, further weakening sentiment.

While the recent slowdown reflects cautious investor behaviour, analysts view it as a natural market cycle rather than a long-term concern. However, in the short term, investor confidence remains subdued.

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