With only 1.60 million accounts opened in April, demat (dematerialized) account openings were at their lowest level since December 2020. The average number of new accounts added each month in the fiscal years 2022 and 2023 was 2.09 million, which represented a major departure from this.
Analysts explain the fall in demat account openings to a number of things, including markets that have been volatile for longer than 18 months, a dearth of significant initial public offerings with favourably priced IPOs, and investors’ muted returns, particularly in the small- and mid-cap divisions.
The number of demat transactions reached 116.04 million, an increase of barely 1.6 per cent from one month prior and a year prior. Between September 2021 and March 2023, the Sensex and the Nifty declined 0.23 per cent and 1.5 per cent, respectively, while the BSE MidCap and SmallCap each experienced a decline of over 4 per cent.
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Many of the new generations of active traders have left the market as a result of the recent high market volatility, which has led to losses for them. To counteract the negative effects of the traders’ withdrawals, the market has seen a continuous increase in Systematic Investment Plans (SIPs) in mutual funds, which now exceed Rs 14,000 crore each month.
Some analysts also attributed the decline in interest in demat accounts to the ongoing IT sector crisis. The IT industry, which has historically been a major driver of new account openings, is currently experiencing extreme uncertainty, which has resulted in widespread downsizing and pay reductions.
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