Retail investors also showed an increase in interest in mutual funds and systematic investment plans
The number of dematerialised (demat) accounts opened in 2018 reached a 10-year high at 4 million, according to a report by Mint, quoting Securities and Exchange Board of India (SEBI) data.
The total number of demat accounts rose to 34.8 million in 2018 from 30.8 million in the previous year, marking a 13-percent increase. This indicates a shift in saving patterns from traditional instruments such as gold, real estate and bank deposits to alternatives such as equity and stocks.
A demat account is opened by an investor with a depository participant to invest in securities such as stocks and bonds. The securities are held in electronic format, making it easier for users to trade shares.
According to the report, demonetisation of two high-value currencies in November 2016 seems to have pushed households to invest in stock markets.
"With the push towards financial inclusion, a new set of participants have bank accounts now. We see a considerable influx in the middle-income groups, which are now diversifying from gold and real estate into the four million new demat accounts were opened in 2018, taking the total number of such accounts to 34.8 million. Along with easier access to stock markets, we see the number of accounts opened in India increasing each year exponentially," Nikhil Kamath, co-Founder and Chief Investment Officer of Zerodha, told the paper.
In India, however, a very small part of the population has access to financial markets, Kamath said.
"In India, less than 10 percent of the population has any exposure to the stock markets as compared to developed economies where this number is closer to 90 percent," he added.
Retail investors flocked to equities after the market offered massive returns in 2017, Prakarsh Gagdani, Chief Executive Officer of 5paisa Capital told the paper.
"Retail always participates, when they see the market going up. Seeing previous years' returns, retail investors flocked to the market in 2018. Also, with the rise of discount brokers offering easier and faster digital account opening, the demat number additions are higher. For example, we clocked over 300 percent growth in client acquisitions last year," Gagdani added.
The enthusiasm of retail investors kept pace even after a muted 5.91 percent return in 2018. In 2018, 24 initial public offerings (IPOs) that hit the market, raising a total of Rs 30,959.07 crore compared to Rs 67,147.44 crore garnered by 36 IPOs in the previous year.
Retail investors also showed an increase in interest in mutual funds and systematic investment plans (SIPs). An SIP allows an investor to invest a fixed sum in a mutual fund scheme periodically at fixed intervals.
There are 80.3 million mutual fund folios or accounts as of December 2018, of which 99.5 percent is accounted for by individual investors, according to Association of Mutual Funds of India (AMFI). Individual investors held Rs 12.91 trillion in mutual funds as of December 2018, a year-on-year increase of 13 percent.
Overall, 75.3 million accounts belonged to retail investors, 4.54 million high to net worth individual accounts and 4.38 lakh accounts were held by institutional investors.
"Retail investor accounts have shown a positive rate of growth since March 2014," said AMFI. In 2017, mutual fund folios stood at 66.5 million. Investments of individual investors in equity schemes increased 15 percent over December 2017.Analysts told the newspaper that participation of retail investors is at an inflection point and they expect to see a much larger influx of retail participants allocating their savings to the stock markets in the coming future.Not sure which mutual funds to buy? Download moneycontrol transact app to get personalised investment recommendations.