‘In every crisis lies an opportunity’ - this phrase has attained a new meaning for the retail investor community since 2020. Post the market slump caused by the 2020 lockdown, the number of demat accounts have nearly doubled - drawing more and more new retail investors onto Dalal street.
According to the National Securities Depository, and Central Depository Services, the number of new demat accounts opened by retail investors was around 1.9 million in January 2019. The FY 2020 saw a record addition of 4.9 million new demat accounts. Subsequently, 14.2 million new demat accounts were registered in FY 2021, i.e., nearly a three-fold increase over FY 2020. This data indicates a departure from the historically known response of panic selling and reduced activity by the retail investors in the aftermath of a market crash. This novel response can be attributed to various factors as listed here.
Reasons for a YoY increase in New demat accounts since FY 2019
- The Lockdown Itself: A large part of economic activity got severely hampered by a series of stringent lockdowns in the last couple of years. This led to a shift in investor preferences from physical assets to financial assets. More and more investors chose to put their money in capital markets rather than buying gold or silver.
- Short-term Gains Opportunity: More disposable incomes and falling deposit rates since 2020 presented the retail investor community with a short term gains opportunity by trading in the stock market. Investing in stocks and bonds not only allowed the investors to make a quick buck but also facilitated an alternative source of income by yielding high returns.
- Ease of Technology: Opening a demat account involved a physical KYC verification that was made easy through smooth access to technology. Electronic KYC and Aadhaar digital signatures assisted the retail investor community to open new demat accounts with just the click of a button from the comfort of their homes.
- The Millennial Investor Takes Over: In line with the global trend, young millennials in India took a keen interest in stock trading by opening new online demat accounts. With time on their hands, these young, first-time investors capitalised upon the market momentum and reaped some quick, handsome returns. Further, they were instrumental in spreading the investment advice to their close social circles.
- Rise in the number of Women Investors: Stock trading in the last couple of years resulted in gender exclusivity with a rise in the number of women investors and traders as compared to the previous few years. Women investors were key contributors to the market participation growth seen since 2020.
Lack of proper financial planning and investment is riddled with woes, and the impact of the lockdown on livelihoods has only reasserted its salience. With the economy expected to perform better, and an improvement in corporate earnings, more and more investors are moving towards stock trading to fetch long-term returns for a financially secure future. With the ease of technology, you can now open a demat account online on a platform that suits your trading requirements and provides a hassle-free trading experience.
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