A demat account is opened by an investor with a depository participant to invest in securities such as stocks and bonds
Assets managed by the mutual fund industry have grown from ₹24.09 tn in Dec 2018 to ₹27.26 tn in Dec 2019
Retail investors piled into the Indian stock market in a year that saw soaring equities and a slowing economy, driving the number of new dematerialized accounts opened in 2019 to a 10-year high.
According to data from the Securities and Exchange Board of India (Sebi), both new demat accounts, and the total number of such accounts hit a 10-year high in 2019. While new demat account openings rose 12.5% from the previous year to touch 4.5 million, total demat accounts at the end of 2019 stood at 39.3 million, up from 34.8 million in 2018.
A demat account is opened by an investor with a depository participant to invest in securities such as stocks and bonds. The securities are held in digital format.
According to analysts, policy changes like easier know-your-customer (KYC) norms, greater internet penetration, affordable devices and technology, which enabled easy access to services have increased the financialization of savings.
Prakarsh Gagdani, CEO, 5paisa.com, said: “A significant increase in mobile and internet accessibility and entry of new millennials into the investment ecosystem has boosted account opening." He added that market-savvy retail investors who have access to proper research will continue to invest in stock markets besides investing in equities through mutual funds. 5paisa.com is an online discount brokerage firm and part of the IIFL group.
“Equities are becoming attractive in India due to the slowdown of yield in physical assets like real estate and gold. Further, the markets have performed well in 2019 especially in large caps which drums headline interest from the retail population," said Nikhil Kamath, co-founder and chief investment officer, Zerodha.
Kamath believes that government-led initiatives to create pan-India awareness on mutual funds and financial assets have helped penetration in non-metros. “However, there will need to be a specific shift from physical assets which we think will be strongly motivated as real estate and gold continue to underperform, and as interest rate cuts decrease yield on traditional retail fixed deposits."
In 2019, the equity benchmark index Sensex jumped 14.38% while the BSE Midcap and BSE Smallcap indices were down 3.05% and 6.85% respectively. The primary markets were tepid with 16 initial public offerings (IPOs) raising a total of ₹12,361.56 crore, against 24 IPOs raising ₹30,959.07 crore in 2018.
Mutual funds have also attracted retail investors, with money collected through systematic investment plans (SIPs) showing a growth trend. Total money collected through SIPs was ₹98,612 crore in 2019. An SIP is an investment plan offered by mutual funds wherein one invests a fixed amount in a mutual fund scheme periodically at fixed intervals.
According to data from the Association of Mutual Funds in India, there are 87.13 million accounts in the mutual fund industry as of December 2019, of which 89.8% is accounted for by retail investors. There were 78.21 million retail investor accounts, 8.17 million high networth individuals (HNI) accounts and 0.74 million institutional investor accounts. Since December 2014, there is an increase in investor accounts from 40.3 million to 87.1 million in December 2019.
Assets managed by the Indian mutual fund industry have grown from ₹24.09 trillion in December 2018 to ₹27.26 trillion in December 2019, representing a 13.18% growth in assets over December 2018. The proportionate share of equity-oriented schemes is now 42.3% of the industry assets in December 2019, up from 41.9% in December 2018. Individual investors primarily hold equity-oriented schemes while institutions hold liquid and debt oriented schemes. 69% of individual investor assets are held in equity oriented schemes, said Amfi.