Aspirational middle-class aid sharp increase in the number of demat accounts

Rajesh Kurup Mumbai | Updated on June 16, 2021

India now has about 6.9 crore accounts lead by Maharashtra and followed by Gujarat.

Led by a rush of aspirational middle-class to stock markets and rally of the bourses, the number of demat accounts in the country has been on a steady rise.

India now has about 6.9 crore demat accounts, with Maharashtra continuing to top the charts with as much as 1.49 crore, much ahead of Gujarat, which came second with 85.9 lakh investors.

As of January 2021, the country had a total of 5.15-crore demat accounts, compared with 4.08-crore as of financial year 2020 and 3.59-crore as of FY19. Maharashtra, which houses both BSE and NSE, traditionally had the largest number of investors.

While Uttar Pradesh came in third with 52.3-lakh investors, Karnataka followed the suit with 42.2-lakh and Madhya Pradesh with 25.7-lakh investors, according to data available on the BSE.

“With Infrastructure development in northern India and across the hinterland, we are witnessing more corporates putting up manufacturing facilities given the fact that State governments are offering tax breaks. This is fuelling demand for many consumer appliances as the Ujwala Scheme has ensured gas connections in those parts,” S Ranganathan, head of research at LKP Securities told BusinessLine.

“An aspirational lower middle-class, therefore, is creating demand for products and the financialisation of savings is a big tailwind, which is reflected in the way demat accounts have been opened,” he added.

Botton of the list

Lakshadweep with a meagre 480 accounts was at the bottom of the list, while Mizoram was ahead with 5,900, Andaman & Nicobar Islands had 9,700 investors and Dadar & Nagar Haveli recorded 21,200 investors, as of June 2, 2021.

“After the fall in March 2020, the stock market has rallied for the rest of the year. Due the economic uncertainty, there is a tendency among households to increase precautionary savings. With phenomenal returns over other investment options, investors increased their exposure to stock market in order to reap the benefits. Smartphone and internet penetration in these areas also supported the demat account openings,” Deepthi Mathew, Economist at Geojit Financial services, said.

Industry experts expects more middle-class in UP to open demat accounts as several auto OEMs and ancillary companies are setting up facilities to avail of tax breaks and concessions, and FMCG and pharmaceutical units foraying in due to manpower availability.

A demat account, which is short for dematerialised account, is an account to hold financial securities in electronic form and is maintained by National Securities Depository Ltd and Central Depository Services Ltd.

Published on June 16, 2021

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