Five-point roadmap to increase India’s demat account holding by 5 times till 2025

By Kamlesh Shroff

The equity market in India saw a meteoric rise in the number of Demat accounts in the last two years, thanks to a robust investment climate and technology-anchored transparent trading system across geography. Both depositories – NSDL and CDSL – reported a cumulative Demat account number in India at a record 100 million, an increase of 145 percent from 40.9 million reported in the pre-Covid pandemic days. In the last three years, the number of Demat accounts has tripled. During the last three years, the equity markets have taken a giant leap with the benchmark Sensex and Nifty 50 indices witnessing a gain of 66 percent.

Following are five-point roadmap:

Despite such phenomenal growth, the number of India’s Demat accounts has huge potential to grow further. Let’s consider the following five-point roadmap that can drive India’s equity markets and therefore translate into a possibly five-fold increase in Demat account:

Under-penetration: Against a population of around 140-crore with young minds of 40 percent, Indian markets remained deeply under-penetrated. The stock and equity markets require to reach villages where a massive wealth remains mostly idle for months and years. Even if a fragment of the village assets comes to the Indian equity market, the benchmark indices will move leaps and bounds.

Increase in financial savings: Entering the equity market is commonly understood as a loss-making proposition at least in the beginning in absence of deeper market understanding and knowledge of financial instruments including equities. There is a need to change this concept and make investors aware of the fact that the stock market is meant for long-term investment and not just a short-term game. Once this understanding spreads through a wide coverage of investor awareness programmes, the market will take a bump with a bump in the Demat account.

Adoption by other asset classes such as insurance: The equity market in India needs to align with other financial instruments such as insurance, to create confidence among investors. Especially, the new investors need a confidence booster to start investing in the equity market.

Increased smartphones /fast internet /digital tech: India has seen the launch of 5G technology which would help smartphone users to trade in stocks directly from anywhere. With the number of smartphone users increasing rapidly, connecting them with the equity market would require only a small effort.

Growing popularity of trading among the young population: While the popularity of trading in equity among the young population has been increasing consistently, still there is wide room to boost it further.

The equity market has seen an addition of around 2 million new accounts every month so far this calendar year. But, given the potential and speedy economic growth, the market can see a five-fold growth in the Demat account in the next three years.

(Kamlesh Shroff is Director, Association of National Exchanges of Members of India (ANMI). The views expressed in the article are of the author and do not reflect the official position or policy of FinancialExpress.com.)