In the past couple of years, the Indian stock markets have achieved far more than they have in the past few decades. Markets and their makers have seen a huge spurt in the opening of Demat accounts in the country, and more and more investors wish to get on the investing and trading bandwagon. Furthermore, this is not just the scene in large metros in India, but the demand for Demat accounts is emerging from smaller cities too. Why is this the case? And why so sudden? Afterall, this has happened in just two years or so. It's interesting to delve into this surge in Demat accounts.
In March 2019, just as the pandemic struck the world, Demat accounts in India were at 3.6 crore in number. Then, there were no signs of any potential increase in this figure. However, as of late 2021, November to be precise, demat accounts were at some 7.7 crore in number, according to a statement made by the Securities and Exchange Board of India (SEBI) chairman, Ajay Tyagi. By this time, India was attentive to an exponential increase in online trading activity as well. This trend was well-aligned with the amount of Demat accounts in action.
The primary reason for opening Demat accounts is when you wish to invest in assets like stocks, for instance. A Demat account holds these assets in a digital format. Moreover, if you wish to trade in equities, you have to have a Demat account, and this will be linked to a trading account that facilitates your transactions (buying and selling shares, or any other asset). If India is witnessing more Demat accounts in operation, that means there are more people investing in assets than there were before. This has occurred, in a large part, due to the pandemic, but even with the lifting of lockdowns, the trend has continued as people have become aware of the positives of trading and investing in the share market.
You must remember that enforced lockdowns at the beginning of the pandemic, and throughout the span of almost two years resulted in people staying home from work. If you were part of a ‘work-from-home’ culture, you were lucky. Many individuals lost their jobs altogether, and for want of an alternative source of income, individuals had to look elsewhere. Numerous people looked in the direction of the markets for ready cash. Most found that this way of earning could not only supplement existing incomes, but could become sole income sources too. It's important to note that the majority of individuals affected by employment termination, or pay cuts, are young people. These are the novice investors who have opened Demat accounts for the first time and wish to trade. Although the markets crashed in 2020, young investors were not deterred in trying their hand at the markets and investing. Since 2020, leading brokerages have reported opening close to a million Demat accounts, and nearly 75% have been opened by investors under age 30. Remarkably, this isn’t just an Indian pattern, but has been seen globally as well.
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