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Equity markets surged 8.7 percent gained in July, but new dematerialised (demat) accounts did not see much growth, a report by Business Standard stated.
"About 1.8 million new accounts were opened with two depositories, CDSL and NSDL, to 98.33 million. The number was slightly more than 1.77 million in June, but nearly 30 percent lower than the average 2.7 million new accounts opened during the first half of calendar 2022," the report informed.
New Demat account openings hit a high in October 2021, when the Indian markets were around their record highs, however, since then the market trend has largely been downwards amid headwinds such as monetary tightening, the Russia-Ukraine war, rising commodity prices and fears of recession, noted BS.
Trading volumes have slowed down as well, it added.
"The average daily turnover for the cash segment—dominated by retail investors--was ₹46,602 crore in July. The amount was up 4.5 percent month-on-month (MoM), but 26 percent lower than the 12-month average," said the market daily.
The report also stated that a moribund initial public offering (IPO) market is weighing on new account openings. There has not been a single offering since after May.
"IPOs have been magnets of sorts that attract new investors to the market. The recent IPOs not performing has affected sentiment. The sentiment towards the IPO market will only revive after a few issues do really well,” Nitin Kamath, founder and chief executive officer of Zerodha told BS.
E Prasanth Prabhakaran, managing director and CEO of Yes Securities, said that the euphoria around Life Insurance Corporation’s IPO contributed to new account openings last year.
Total Demat accounts were expected to cross 100 million in July, pointed out the report, however, given the drop in pace, the milestone is expected to be hit sometime this month.
Last week, CDSL announced it had crossed 70 million Demat accounts. Drying of the IPO market and trading volumes has made brokerages scale back their promotional activities, BS further highlighted.
Brokers also told BS that retail investors are by nature bullish, and market volatility is discouraging investors, so, new Demat accounts and trading volumes are likely to remain stagnant till the markets rise consistently.
