Total demat accounts in India touch 10.8 crore in December

The growth of demat accounts in India have been an amazing story, especially in the aftermath of the COVID pandemic. The total number of demat accounts in India as of the close of December 2022 touched 10.80 crore demat accounts. A demat account is opened by a trader along with the trading account to hold shares in dematerialized form. A demat account is mandatory to trade in equities in the Indian markets. India has done away with physical share certificates and all shares have to be in demat form, else they cannot be sold in the open market. as of the close of December 2022, the total number of demat accounts were 34% higher on a yoy basis, compared to December 2021.

However, the account additions were rather subdued in the month of December at just about 21 lakh accounts. While, this is better than the November 2022 figure of 18 lakh demat accounts the monthly demat account accretions compared to the previous year ended FY22. For instance, if you look at FY22, then the average run-rate on a monthly basis was the accretion of 29 lakh demat accounts. However, one can argue that this sharp fall was largely on account of the IPO market dwindling during the current year. Year 2021 was a year when IPOs had collected more than Rs1.20 trillion, but in year 2022 the IPO collections were less than half that figure. That was the reason for lower demat accounts.

Needless to say, it was CDSL that retained its overall market share of 72% in terms of the number of demat accounts. However, there was some solace for NSDL in the sense that their market share of incremental demat accounts in the month of December 2022 rallied from 20.9% to 21.3%. Despite falling lower on the number of demat accounts in custody, it is NSDL that dominates in terms of assets under custody. For instance, out of the total assets under custody, NSDL has about 80% of the assets under custody overall while the balance is with CDSL. This is more because of the large number of institutional demat accounts with NSDL, being the pioneer in the business since the year 1997.

Despite the growth in the demat accounts, there has been a fall in the NSE active accounts which continues to grow at a much lower pace. While the active user clients in the industry as a whole rose 12% year-on-year to 35 million, it has fallen by 1% on a MOM basis. Normally brokers use the IPO as a means of account activation as it offers them a trigger to touch base with the customer. With the IPO markets much thinner and largely dominated by the smaller issues, brokers do not get the opportunity for activation of clients. That remains a big challenge and hopefully that should change in the year 2023.