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New retail investors are from Tier II and III cities, demat accounts see a spike

According to the Securities and Exchange Board of India (SEBI), close to 6.3 million new DEMAT accounts were opened in the last 9 months, tallying the total count to 44.46 million.

December 15, 2020 / 10:19 AM IST


The year 2020 will go down as a year when the world was brought to its knees by a tiny microbe that left a trail of death and destruction, devastating economies but it will also be the year when human enterprise and science offered hope in otherwise a trying time.

Markets, too, have had their share of the good, the bad and the ugly. Retail investors are a happy lot and more so those who entered the D-Street in 2020. The Nifty50 has already rallied more than 11 percent this year to record highs— from March lows it has jumped more than 70 percent.

According to the Securities and Exchange Board of India (SEBI), close to 6.3 million new demat, or dematerialised, accounts have been opened in the last nine months, taking the total count to 44.46 million. A demat account is used to hold shares and securities in an electronic form rather than physically on paper.

And the action is shifting from metros to tier II and III cities, which is a positive sign, say brokerage firms. More demat accounts in non-metros reflect deeper penetrations of equity markets.

There are several reasons for the growing interest of retail investors in equities. The lockdown gave people time to think and understand the market and invest. Falling interest rates and the March crash made equities attractive.

The outbreak brought the economy to standstill as businesses suffered and jobs were lost, the share market offered a chance to supplement income.

According to the data by BSE, among the large states, Telangana registered the highest percentage increase in new client at 157.01 percent YoY, while Andhra Pradesh clocked a 33.39 percent rise in people from smaller cities opening demat accounts.

FYERS, a Bengaluru-based investment and trading platform, last week announced its foray into Visakhapatnam in Andhra Pradesh.

“FYERS, too, observed an increase of 80 percent of demat account openings over the last five months, out of which 25 percent of the accounts were from traders in Andhra,” FYERS co-founder and CEO Tejas Khoday said.

To strengthen its presences in the southern states, the firm was expanding operations in Vishakhapatnam, he said.

“At FYERS, 25 percent of our active users are from Andhra Pradesh and Telangana and about 50 percent of our users are between the age of 25 and 34,” Khoday said.

FYERS is not alone when it comes to volume generated from the non-metro cities.

Edelweiss Wealth Management, the second largest non-bank, wealth management firm in India, announced a 70 percent year on year (YoY) increase in its user base in India for Edelweiss Mobile Trader (EMT), its trading application.

“The growth has been led by Tier II and Tier III cities that saw a growth of over 87 percent YoY. Interestingly, women trading on the app have grown by 127 percent YoY, while the accounts being opened via the app grew over 300 percent in Q2 FY21 as compared to Q2 FY20,” a release said.

“Our pace of growth validates our strategy and commitment to bring best-in-class investment advisory to our customers. Coupling this with technology, we hope to enhance user experience and also provide them with timely tools that can help in decision-making, to further compound their wealth,” Rahul Jain, Head – Personal Wealth Advisory, EWM, said.

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Kshitij Anand
Kshitij Anand is the Editor Markets at Moneycontrol.