Bull run inspires another 4 million to open demat accounts in February

Influx of new investors shows that more households are taking to direct investing

For the third month running, investors opened over four million new demat accounts in February, showing growing household confidence in stock markets and their increased risk appetite.

Over 13.12 million new demat accounts have been opened in the last three months, taking the total count close to the 150-million mark.

Demat accounts are needed for trading and holding shares electronically. The additions in February were slightly less than the previous month but 55 per cent higher than the prior 12-month average of 2.8 million.

Last week, NSE said the unique investor count had crossed 90 million for the first time, with the latest 10 million additions coming in the previous five months.

“With the economy growing, people are moving from saving to investing. This transition to investing is through mutual funds (MFs) by opening systematic investment plans (SIPs) or direct investing. And markets have done well over the last two and 2.5 months, which is attracting new investors to the market,” said Jaideep Hansraj, CEO of Kotak Securities. 

On a year-to-date basis, the Nifty is up 3 per cent, while the Nifty Midcap 100 and the Nifty Smallcap 100 indices have gained 6.5 per cent and 5 per cent, respectively.

During calendar 2023, the Nifty mid-cap and small-cap index rose by 46.5 per cent and 55.6 per cent, respectively.

Broad-based gains in equities and a good initial public offer market (IPO) continued to attract investors. Though the mid and small-cap indices posted minor losses in February, they had rewarded investors handsomely in January 2024 and the previous year.

“Both the benchmark and small and mid-cap indices are trading close to their highs. A lot of stocks have given 30-40 per cent growth. The momentum has been building vis-a-vis retail participation equities in the last six months. Once a particular set of retail investors participate, word of mouth spreads slowly, and every month, we see a higher number of demat accounts getting opened,” said Prakarsh Gagdani, CEO of Torus Financial Market.

Gagdani added that the hopes of regime continuity and its impact on policy making are wooing people to take up equities in a big way.

Moreover, IPOs, seen as a new investors’ lodestone, were robust in February.

Last month, 11 companies raised Rs 7,478 crore. Given the lure of listing gains, investor sentiment toward IPOs has become more favourable.

Many existing investors are opening new accounts for their family members to enhance their chances of securing an IPO allotment.

“Most IPOs which have hit the market in the last few months have given investors listing gains. The quality of the IPOs has also been good. It’s both the quality and post-listing performance attracting investors,” said Gagdani.

In the future, the momentum in new demat additions will continue for a few more months, and post-May, it is likely to revert to its long-term average of 2-3 million, say industry players.

“Major factors which are moving markets will be fully discounted, and markets will be more prone to trade sideways," Gagdani added.