Growth of Demat accounts dropped to a 4-quarter low, experiencing the sharpest decline ever recorded
The total number of demat accounts continued to increase in the December quarter, but the rate of new account openings experienced a significant slowdown. This deceleration was primarily due to the substantial market volatility and corrections that occurred during the period.
Approximately 9.77 million new accounts were opened during the quarter, marking the slowest growth in the past four quarters. This represented a sharp decline of 26.3% compared to the previous quarter, which had seen a record 13.25 million new demat accounts being opened.
The slowdown in new account openings coincided with a correction in the Indian equity markets. Both benchmark indices, Sensex and Nifty, experienced significant declines of 7.3% and 8.5%, respectively – their most substantial quarterly drops since June 2022. The broader markets also struggled, with the BSE MidCap and BSE SmallCap indices declining by 6% and 3.5%, respectively, their weakest performance since mid-2022 and March 2023.
The downturn in equities was influenced by global uncertainties, such as fears of tariff wars following Donald Trump’s victory in the US presidential elections, expectations of fewer Federal Reserve rate cuts, and ongoing geopolitical tensions. Domestically, weak corporate earnings, slowing economic growth, tight liquidity conditions, delayed government spending, and inflationary pressures further undermined investor confidence.
Additionally, reduced activity in the derivatives market, partly due to new stringent regulations by the Securities and Exchange Board of India (SEBI), contributed to the slowdown. Market participants noted that these changes limited opportunities in the options segment, diminishing investor interest.
The combined average daily turnover for the F&O segment on the BSE and NSE reached Rs 280 trillion in December, the lowest since August 2023. This marked a 36.56% decrease from Rs 442 trillion in November.
The decline in trading volumes is significant, with a decrease of up to 48% when comparing December to September. Index futures turnover has decreased for the second consecutive month, while turnover in stock futures, index options, and stock options has declined for three consecutive months.
Overall, there were a total of 185.3 million demat accounts registered with NSDL and CDSL as of the end of December, an increase from 182.05 million the previous month.
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Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.