“Record 1.42 crore Demat accounts opened in FY 21.”
Now, that’s music to the financial sector’s ears. More investors being aware and even more participating in the market is a welcome sign.
In a year marked by uncertainties due Covid, retail investors joined the stock market like never before. It was unfortunate, what with job and pay cuts, but a unique situation for the stock market where investors (new and regular) dabbled in stocks and set record highs.
SEBI DATA
- New Demat accounts – Touched all-time high of 10.7 million between April 2020 and January 2021.
- More than double the new accounts opened in FY20 at 4.7 million
- FY19 and FY 18 added around 4 million new accounts each
- 1.7 million new Demat accounts added in Jan 2021, highest monthly increase since September 2019
Total Demat Accounts in India – 51.5 Million (As of Jan, 2021)
FY20 – 40.8 Million
FY19 – 35.9 Million
What’s a Demat Account?
Well, for the uninitiated, Demat is short for Dematerialized account, a modern-age investment account. Demats are necessary for investing and trading in the capital markets i.e. investing in stocks, bonds etc. The securities you purchase are digitized, hence ’Dematerialized’.
Reasons for the spike
- More disposable Income
- Time for Research and Trade, work from home has aided this
- Volatile markets at low points during the start of FY21, first-time investors and millennials jumped in on the opportunity for short-term gains
- Additional /alternative source of Income
How Technology helped?
- Faster, smoother and not to mention easier access to the stock markets due to technology
- Online Demat Account and paperless Demat account opening
- e-KYC and Aadhaar e-signing
- Increased participation from Tier-2 cities
Alluring deals also helped like Free Demat Account opening and Demat Account with Zero AMC (Annual Maintenance Contracts) along with new Demat accounts. Major participation came from the 20-30 year demographic, young guns who want to be in control of their finances. Direct equity investing witnessed the majority of this spike as compared to mutual funds.
As the other asset classes like fixed deposits, bonds and real estate gave lower returns than stocks in FY 21, investors took to trading with gusto to make quick profits. Post setback, Sensex and Nifty gave best returns in 11 years. Both have risen almost 75% in FY21, while BSE Midcap and BSE Smallcap increased 96% and 120% respectively. The need to revive the economy and better corporate earning helped instil confidence in investors.
Lessons learnt
Covid made us look at things differently, especially when it came to livelihoods and the importance of financial planning. It showed that disaster can strike anytime and basic sustenance can also become difficult. People want to ensure that they are financially secure to face any unseen calamity, and this notion led to a great number of retail investors entering the stock market. The rise in retail investors is not unique to India, but it is something FY 21 witnessed across the globe, technology and security being the two biggest drivers.
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