Demat account additions in 2024 may cross 4 crore level: SBI report

With a week left before the Calendar 2024 draws the curtain, SBI Research in its latest note expects demat account additions to exceed the four crore level this year. SBI Reserach said nearly one in every four investors today is a women and that the declining median age and increasing share of less than 30-year age individuals reflects the influx of relatively younger investors in the markets over the last few years. 

Thanks to technological advancements, lower trading costs and increased access to information, total demat accounts in the country stand at 17.76 crore at last count and the dominance of Mumbai and Western region as center of supply of funds is declining over time, SBI noted. Demat account addition in 2024 so far stands at 3.9 crore. 

"Indirect retail participation in financial markets see flow fund from Bangalore, Hyderabad, Kanpur with direct mutual fund  participation overtaking indirect in key regions in terms of gross flows. Direct equity participation in equity has witnessed wider spatial spread across all direction," it noted.

Demat accounts hit the 15 crore level in FY24. Out of this, 9.2 crore were unique investors on NSE as compared with a paltry 2.2 crore in FY14.   

"Since 2021, on an average 30 million (3 crore) new demat accounts are added every year indicating increasing prevalence of using capital market as a channel of financialization of savings," it said.

The NSE market capitalisation has increased by more than 6 times to Rs 441 lakh crore in FY25 so far compared to FY14. SBI noted that 1 per cent rise in stock market capitalisation leads to 0.06 per cent rise in GDP growth rate.

The growth in market capitalisation granger causes growth in GDP, it said. However, the causality does not follow from GDP to market capitalisation, SBI added.

"The impulse response shows that 1 standard deviation shock in market capitalisation has a positive impact on real economy with the impact drying out after three time periods. A higher market capitalisation signals robust economy and higher investor confidence consequently driving overall economic growth," it said.

It said the average trade size in equity cash segment has increased from Rs 19,460 in FY14 to Rs 30,742 in FY25 so far. 

"SEBI is spurring democratisation of capital markets, ushering in innovations through a confluence of regulatory  emblems, technological guardrails, investor centricity and increased awareness…. since 2021, on an average 30  million new demat accounts added every year…Nearly every 1 in 4 now a women investor…1% rise in market  capitalization leads to 0.06% rise in GDP growth rate," it said.