APN News

  • Thursday, March, 2020| Today's Market | Current Time: 03:00:49
  • Given the push towards financial inclusion, higher numbers of citizens now have bank and savings accounts across the country. In this regard, a new report from the Securities and Exchange Board of India (SEBI) revealed that dematerialised (Demat) accounts reached a 10-year high at 4 million, in 2018. This is heartening news for the stock market, and the economy overall, as a considerable influx is in the middle-income groups that are now moving away from traditional investments into stock markets.

    According to the SEBI report, the total number of Demat accounts increased from 30.8 million in 2017 to 34.8 million in 2018. This marks a whopping 30% increase and indicates a radical shift in the saving patterns of investors. An increasing number of investors are now opting for equity and stocks as compared to gold, real estate and bank deposits.

    Financial experts opine that the demonetisation initiative taken in 2016 encouraged households and investors to opt for stock markets. In addition, there has been greater access to stock markets with the proliferation of online accessibility and ease of use that is helping investors to consider demat account opening.

    Even so, the Indian market is still at a nascent stage, as only a minuscule portion of the population accesses the financial markets. It is believed that less than 10% of the Indian population is exposed to the stock market as against 90% of the people in developed countries.

    A Demat account helps investors to invest in stocks and bonds with the help of a certified depository participant such as Kotak Securities. The investments in a Demat account are maintained in a digital format.

    Given the decisive run of the market over the years, that has been greater participation from retail investors. Viewing profitable returns from previous years, a higher number of retail investors opted to open Demat accounts in 2018. In addition, the speedy digital account opening processes and the rise of numerous brokerage firms has helped Demat account opening numbers to go higher. Some brokers were reported to have clocked over 300% growth in client acquisitions in 2018.

    More and more retail investors are now becoming active in secondary markets as they are gaining knowledge and accessing a more extensive number of knowledge platforms. With a more significant number of demat accounts opening each year, participation in the stock market is likely to progress in the coming years.

    In spite of below modest returns in 2018, retail investors were nonetheless enthused about opening Demat accounts. The report further revealed that over 20 initial public offerings that hit the market in 2018 helped raise over Rs. 30 crores as compared to Rs. 67 crore raked in by 36 IPOs in 2017.

    The good news has also extended to mutual funds and systematic investment plans. AMFI data has revealed that retail investors showed a more significant increase in mutual fund investments in 2018. According to the Association Of Mutual Funds In India (AMFI), as of December 2018, there were 80.3 million mutual funds or accounts. Over 99.5% of individual investors held Rs. 12.91 trillion in mutual funds alone, in December 2018, revealing an annual increase of 13%.

    Since March 2014, retail investor accounts have shown a positive growth rate. Currently, retail investors participating in the stock market is at an inflexion point. However, a much more massive influx of retail participants investing in the stock market is likely to increase in the coming months.