 "New demat additions jump 29% in 2023 amid rally in markets, shows data")
The number of dematerialised (demat) account additions in 2023 exceeded 31 million, driven by the rally in the markets, stupendous gains in small and midcaps, and the robust performance of initial public offerings (IPOs).
The number of demat accounts opened with the two depositories – the Central Depository Services (CDSL) and the National Securities Depository (NSDL) -- rose 28.7 per cent in the past 12 months, from 108.1 million to touch 139.2 million. About 4.1 million demat accounts were added in December 2023, making it the highest-ever monthly addition.
"The 2023 market gave double-digit returns after a muted 2022. This rally was broad-based. All segments, including microcaps worked. There is a tremendous amount of liquidity in retail, and their ownership of equities is rising," said Prakarsh Gagdani, former CEO of 5paisa Capital
The benchmark Nifty50 rose 20 per cent in 2023. The Nifty Midcap 100 rose 46.6 per cent and the Nifty Small Cap 100 rose 55.6 per cent.
India's macroeconomic stability, corporate earnings, and robust inflows from domestic institutional investors and foreign portfolio investors (FPI) helped the Indian markets end with gains. The US Federal Reserve's dovish pivot and the Bharatiya Janata Party's win in three out of five key state Assembly elections further boosted the rally.
The IPO gush was an investor lodestone. In 2023, 57 IPOs hit the markets and raised Rs 49,434 crore. Given the gains this year, investor sentiment toward IPOs has become more favourable. Brokers said many existing investors are opening new accounts for their family members to increase their chances of securing IPO allotments.
"In December there was a series of IPOs, which contributed to the demat addition. After December 3, the markets started reaching an all-time high. Even mid and smallcap indices continued to hit new highs. In such an ebullient market, demat account openings are expected to be robust, which is on the expected lines,” said Jimeet Modi, founder and CEO of Samco Securities.
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Alok. C. Churiwala, the managing director of Churiwala Securities, said IPOs were the biggest catalyst for new account opening this year.
"When an investor is testing waters in capital markets, the usual way is by investing in IPOs. This year, the issues were fairly priced, and one was most likely to make money if one managed to get the allotment,” he said.
Brokers are cautiously optimistic about the outlook. At the same time, some feel the earnings momentum will sustain the gains made in 2023. Some are circumspect, considering the headwinds we must grapple with this year.
"It is going to be a volatile year. We have elections, and one needs to see whether the Fed rate cuts pan out how investors expect. We are not expecting four million accounts to open every month. We will revert to the average of 2-2.5 million monthly accounts,” Modi added.