Figures provided by the depository show that the number of active dematerialised (Demat) accounts in the country have grown by 63% over the past 12 months, reaching 89.7 million in the 2021-22 (FY22) financial year. As of March 31, the Central Depository Service (CDSL) managed 63 million accounts with assets under custody (AUC) of Rs 37.2 trillion. Meanwhile, the National Securities Depository (NSDL) processed 26.7 million accounts with Rs 302 trillion.

In a post-pandemic world, the number of Demat accounts has increased by 2.2 times, while the combined AUC has also doubled. “The pandemic has forced everyone worldwide to rethink their spending and investing habits. The widespread availability of smartphones and low-cost data has pushed investing and trading into the digital realm. The use of eKYC and Aadhaar eSign has made opening a Demat account paperless and a streamlined and simple process. Currently, over 80 per cent of our total customer base are millennials, over 85 per cent are from second-and third-tier cities, and 70% are first-time investors,” Upstox CEO Ravi Kumar told Business Standard recently.

Over the past 12 months, the market has continued to extend gains since the Covid-19 lows in March 2020. The benchmark Nifty is up 19 per cent in FY22, while the mid-cap index is up 25 per cent and 29 per cent, respectively. “There-is-no-alternative (TINA) factor has become the mantra in the stock market, driving the stock market sharply higher. This rally in the past two years has attracted many new retail investors who are expecting higher returns than investing in bonds or term deposits.”

Demat account Another reason for the growth is the rise of discount brokers such as Zerodha and Upstox, making it easy to access financial markets through e-KYC, zero brokerage, and investment and trading portals at your fingertips,” Prabhudas Lilladher, Economist and Quant Analyst Ritika Chhabra said.

The influx of new investors has increased trading volumes. In FY22, equities spot market volume increased by 9 per cent, and derivatives volume increased by 2.6 times. In addition, solid retail flows helped the market cushion the blow from a sharp sell-off by foreign investors. Earlier this month, Federal Finance Minister Nirmala Sitharaman praised small investors in parliament. “We have to thank Indian retail investors and their ability to absorb stocks into the Indian market,” she said.

“Looking ahead, we may not see the 30 per cent annual growth since 2020, but it will certainly be in the high double digits. Still, the penetration of demands is much lower than savings bank accounts or mutual fund portfolios—penetration rate. The number of customers with PAN cards is close to 500 million, and we have close to 90 million Demat accounts. Many young people are working in white-collar jobs. Young people are keen to invest in stocks. They prefer to invest directly rather than hand it over to a common Fund or life insurance. Fixed deposit rates are not attractive to this generation,” said Dhiraj Relli, managing director and chief executive officer of HDFC Securities.