Demat additions in Jan hit six-month high to take total past 110 mn

Nearly 2.2 mn new accounts added despite turbulence in the market

Over 2.2 million new demat accounts were added in January—the most since August 2022—despite the turbulence in the equity markets.

The total demat tally crossed 110 million, with over two million accounts a month getting added in the past six months, data provided by Central Depository Services (CDSL) and National Securities Depository (NSDL) showed.

“The monthly additions are more or less a stable number now unless markets fall significantly and the word of mouth on the Street is bad,” said Prakarsh Gagdani, CEO of 5 Paisa Capital.

Market players said some retail investors opened new accounts with an intention to participate in the mega follow-on public offering (FPO) by Adani Enterprises.

The company’s Rs 20,000-crore FPO opened on January 27, just days after US short-seller Hindenburg Research’s report that accused the group of “brazen stock manipulation and accounting fraud”. The allegations led to a sharp drop in shares of all Adani group firms. Despite AEL’s share price dropping below the FPO price, the company managed to garner full subscription. However, it withdrew the offer as the stock tumbled further.

Retail investors—including the first-time investors—largely stayed away from the FPO. Typically, a large IPO or an FPO brings in a new crop of investors into the equity fold. However, it remains to be seen if these clients became active traders or investors.

Market experts said ongoing volatility could be a big hindrance.

"Volatility affects not only customers who are in the market for a while but also the new ones. Monthly returns and sentiment affect new customers more,” said Gagdani.

Market players said the pace of new demat additions is good but there is a lot of duplication.

"A certain number of people get added to the new workforce every year. Markets not giving returns are good for those who missed earlier rallies because you get the opportunity to enter the market. There are also a lot of people who will take a second demat account as some want to split their trading patterns. A new investor would want to do derivative trading in one account and invest in the other. Or they might keep an additional account in case one broker has some technical issue,' Gagdani said.

Going forward market returns are likely to determine whether new investors will gravitate towards direct investing.  Competition from debt returns, FPI flows shifting to China, and elevated valuations, are likely to keep the returns muted this year.


Looking up: New demat accounts added in Jan were highest since August 2022

	Demat A/Cs (mn)
	New additions	Total
Jan-22	3.40	83.98
Feb-22	2.85	86.83
Mar-22	2.85	89.68
Apr-22	2.43	92.11
May-22	2.65	94.77
Jun-22	1.77	96.53
Jul-22	1.80	98.30
Aug-22	2.21	100.51
Sep-22	2.09	102.60
Oct-22	1.77	104.37
Nov-22	1.80	106.17
Dec-22	2.10	108.27
Jan-23	2.19	110.46
Source: CDSL, NSDL