New Delhi : After the volatility and volatility in the market in the last few months, the fast pace of new demat registration has cooled down. The data shows that only 2.65 million accounts were opened in May, much lower than the 3.63 million that were opened in November.
Siddharth Khemka, Head of Retail Research, Motilal Oswal Financial Services Ltd. said, “The primary factor behind account opening is market performance. The broader markets have underperformed in recent times, and mid-cap and small-cap stocks have seen several sharp corrections. Discouraging potential investors. Khemka said growth is also slowing due to the high base of last year and the closure of several large IPOs.
Many individuals had opened demat accounts to apply for big IPOs like Life Insurance Corporation of India and Paytm (One 97 Communications Limited). Analysts said the new IPO rate has also slowed down and this is also affecting the opening of demat accounts.
Deepak Jasani, Head of Research, HDFC Securities Limited said, “Demat account opening may remain weak in the near term. Jasani said that opening a new account depends on two factors. The first is the number of people who have a substantial investable surplus. It is likely that most of such people have already opened accounts and hence, the pace of new account opening is slowing down. As the economy picks up, the number of such people will also increase and account opening will accelerate.
The second is that there should be visibility on the returns that will attract people to the markets, and the volatility of the market has probably discouraged many. As the markets have corrected significantly in 2022 with Sensex and Nifty falling 4-5% year-on-year, and the broader markets coming down more sharply, people are not looking for easy money making ways and hence the markets. living away from
Experts also believe that due to the outbreak of the pandemic and the lockdown, many people, especially the youth, showed interest in the stock markets, leading to a boom in account opening. Sandeep Raichura, CEO, Retail Broking and Distribution, Prabhudas Lilladher, said the brokerage was earlier running multiple campaigns, which led to this increase in account openings. The much awaited LIC IPO is also out of the way and hence, fewer accounts are being opened now.
However, Raichura believes that on a longer-term basis, the trend of opening demat accounts will remain strong, as India remains a low-investment country. He added, “Over time, we expect the numbers to remain equally strong as more and more people enter the equity markets directly and indirectly through mutual funds and opening a demat account may remain healthy, Although maybe not as much as before.” Khemka also believes that as the equity penetration increases over time, so will the demat account openings.
Meanwhile, for now, rising interest rates may also lead investors to other investment options if the stock market does not recover returns.