Demat Accounts See Marginal Increase In December As Weak Sentiments Linger

Latest data shows that market sentiment remains negative, although there has been some recovery in futures and options (F&Os) trading.
Demat Accounts See Marginal Increase In December As Weak Sentiments Linger

The number of demat accounts rose by a marginal 2.1 million to 108 million in December 2022, compared to 1.8 million additions in the previous month, Motilal Oswal Financial Services Ltd. said in a report.

Although the new additions were higher than in the past three months, the number continued to be below the FY2022 average of 2.9 million, it said. The Central Depository Services Limited (CDSL) retained its overall market share of 72 per cent, while the market share of the National Securities Depository Ltd. (NSDL) improved to 21.3 per cent from 20.9 per cent in November 2022.

The active accounts in the National Stock Exchange (NSE) continue to decline, although at a slower pace. Active users rose by 12 per cent year-on-year (YoY) in December but declined 1 per cent month-on-month (MoM) to 35 million, the sixth consecutive month of decline.

The report said the top five discount brokers accounted for 59.3 per cent of the overall NSE active clients, up from 59.1 per cent in November 2022. Discount broker Zerodha saw a 0.2 per cent MoM fall in its client count to 6.6 million, but market share rose to 18.7 per cent or 32 basis points. Upstox fell 7.1 per cent, MoM, to 3.9 million, with its market share dipping to 10.9 per cent. Conversely, Groww’s client count rose by 2 per cent MoM to 5.2 million, with the market share rising to 14.6 per cent.

In addition, traditional brokers like ISEC and IIFL reported a 4 per cent and 9.7 per cent MoM decline in client count, respectively, with their market share dropping to 7.6 per cent and 2.0 per cent.

Negative Market Sentiment

Data shows that the market sentiments remained negative in December, despite a record rise in demat accounts in recent times. Still, there was some recovery in futures and options (F&Os) trading, in which the parties conduct trade of the underlying asset at an agreed price on a fixed date. These products derive their values from an underlying asset, like shares or commodities.

Nifty’s 3.5 per cent MoM decline highlights the continued negative sentiments. The volatility index based on the NIFTY Index Option prices, India VIX, rose from 13.8 in November to 14.8 in December, with the trading volumes or daily average turnover (ADTO) rising by 30 per cent MoM to Rs 190 trillion.

The overall retail ADTO stood at Rs 75 trillion, up 25 per cent MoM, in December. However, client additions stayed sluggish in the month.

Record Rise In Demat Accounts

Demat accounts crossed the historical figure of 10 crores in August 2022, almost a three-fold increase in demat accounts and a two-fold increase in ETF assets in the last two years, according to CDSL and NSDL.

It reflects investors’ growing faith in India’s economic growth. As on August 31, 2022, the total number of demat accounts stood at 10.5 crore, almost three times the number in August 2020.

Interestingly, CDSL took some 16 years to hit the one-crore mark for demat accounts in 2015. It doubled to two crores in the next five years and reached the four-crore mark in just one year and seven months ending July 2021. Currently, it crossed the seven-crore mark in just a year. Besides commanding a higher market share, CDSL covers 99.22 per cent of all pin codes in India.

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