India’s paperless account grew 63% to 89.7 million in FY22, data shows
The number of active dematerialized (demat) accounts in the country jumped 63% in the past 12 months to reach 89.7 million in fiscal year 2021-22 (FY22), according to data provided by custodians. .
Growth was supported by factors such as an increase in smartphone usage, easier digital onboarding of customers and attractive returns generated by stock markets. As of March 31, Central Depository Services (CDSL) managed 63 million accounts with assets under custody (AUC) of Rs 37.2 trillion. Meanwhile, the National Securities Depository (NSDL) managed 26.7 million accounts with an AUC of Rs 302 trillion.
In the post-pandemic world, the number of demat accounts jumped 2.2 times, while the combined AUC also doubled.
“The pandemic has forced everyone around the world to reconsider their spending and investing habits. The widespread availability of smartphones and low-cost data has pushed investment and trade into the digital realm. Using eKYC and Aadhaar eSign has made opening a demat account a simple and paperless process. Currently, over 80% of our total customer base are millennials, over 85% from Tier 2 and Tier 3 cities, and 70% are new investors,” said Ravi Kumar, CEO of Upstox. , recently told Business Standard.
Over the past 12 months, markets have continued their extended rally since the Covid-19 lows of March 2020. The benchmark Nifty index rose 19% in FY22, while average indices and small cap jumped 25% and 29%. respectively. Experts say the attractive yields relative to other asset classes draw investors to the equity market.
“There Is No Alternative (TINA) has become the stock market mantra, fueling a strong rally in equities. This rally over the past two years has attracted a large number of new retail investors who expect to earn higher returns than bonds or their fixed deposit investments.Another reason for the growth of the demat account is the rise of discount brokers such as Zerodha and Upstox, which have made it easier to invest in the financial markets via e-KYC, zero brokerage and access to investment and trading portals at your fingertips,” said Ritika Chhabra, Economist and Quantitative Analyst at Prabhudas Lilladher.
The influx of new investors boosted trading volumes. In FY22, cash equity market turnover increased 9% and derivatives volumes jumped 2.6x. Additionally, strong retail flows helped the market cushion the blow from strong selling by foreign investors.
Earlier this month, Union Finance Minister Nirmala Sitharaman hailed retail investors in parliament. “We have to appreciate Indian retail investors and their ability to absorb stocks entering Indian markets,” she said.
Industry players claim that the number of demat accounts will continue to grow. However, the rate of addition may moderate.
“Going forward, we may not see the 30% annualized growth we’ve seen since 2020, but it will definitely be double digits. Yet demat penetration levels are far lower than penetration of savings bank accounts or mutual fund folios. The number of customers with PAN cards is close to 500 million and we have close to 90 million demat accounts. Many young people get white collar jobs. Young people are eager to invest in stocks. They prefer to invest directly rather than entrusting it to mutual funds or life insurance. Fixed deposit rates are not attractive for this generation,” said Dhiraj Relli, Managing Director and CEO of HDFC Securities.