Spurt in demat accounts hints at growing retail interest in Dalal Street

MUMBAI: The bull run in the stock market in the last financial year, after a prolonged lull, triggered fresh additions of demat accounts, the highest in the past four years.

Over 16 lakh demat accounts were added in the fiscal year that ended on March 31, 2015. This is against 8.07 lakh accounts added in FY14, 10.61 lakh in FY13 and 10.02 lakh in FY12.

NSDL and CDSL, two of the top depositories, witnessed an average monthly growth of 6-8% in demat accounts since May 2014 after the BJP-led government came to power with a historic majority.

"Around 85% of demat accounts added in the past one year are from new investors and not those who wanted a second account," said GV Nageswara Rao, MD & CEO, NSDL. " Demat account growth is higher through brokers offering online trading accounts compared to traditional accounts."

Dematerialisation facilitates to keep shares in electronic than physical form. Also, mutual fund units, bonds and insurance policies are now being allowed to be held in demat accounts.

A highly active primary market is usually seen as a key catalyst for demat account growth in the country. Though the primary markets are yet to revive, demat account opening has recently gone up as small investors anticipated more stability in stock markets, said experts.

The combined number of demat accounts, with both NSDL and CDSL, stood at 234.44 lakh compared to 218.43 lakh in FY14. CDSL has over 96.1 lakh demat accounts, while NSDL has over 1.37 crore accounts.

Key equity indices — Sensex and Nifty — rallied more than 33% since April 2014 after the election results were announced in May. Brokers say a bull run in the past one-year has caught the imagination of small investors and attracted them to markets. However, the growth of demat accounts is far lower than what it was in 2008.

Around 1.6 lakh new demat accounts were opened in the two depositories in the first eight days of January 2008 — a week before the initial public offering (IPO) of Reliance Power. Later, the same IPO also proved as a catalyst for many investors staying away from the markets for a long time. There was also a surge in opening of accounts in the run-up to the IPO of Coal India in 2010.

This was partly because the state-owned company had reserved 1% of the shares sold for its four lakh employees. Demat accounts attract a maintenance charge of Rs 300-600 a year besides a fee on transaction of shares.