April Witnesses 116 Million Demat Accounts, But NSE Active Users Plummet by 16.3% YoY, Reveals Report

The Indian equity market experienced a remarkable resurgence in April, as the Nifty50 index surged by 4% during the month. This substantial rally was primarily driven by the influx of foreign institutional investors into the domestic market and promising indications from the Reserve Bank of India (RBI) suggesting no further interest rate hikes due to easing inflation.

Increased Trading Activities and Decline in New Demat Accounts

The positive investor sentiment not only propelled the market rally but also resulted in a surge in daily trading activities. In April 2023, the total number of demat accounts rose to an impressive 116 million, highlighting the growing participation of retail investors. However, the rate of new account additions witnessed a decline of 18% month-on-month (MoM), with 1.6 million new accounts added in April, compared to 1.9 million in March. Motilal Oswal, a renowned domestic brokerage, reported that this figure was significantly lower than the average new accounts added per month in FY23, which stood at 2.1 million.

Market Share Trends and Declining Active Users

Analyzing the market share trends, Central Depository Services Ltd (CDSL) continued to gain ground on a MoM basis in terms of both total and incremental demat accounts. Meanwhile, the National Stock Exchange (NSE) witnessed a consecutive decline in active user clients for the tenth straight month. In April, the total number of active user clients at NSE experienced a YoY decline of 16.3% and a MoM decline of 4.6%, reaching 31.2 million. The intensity of this fall was even more pronounced in April, with 1.5 million accounts affected, compared to 0.9 million in the previous month.

Increasing Dominance of Discount Brokers

The report highlighted that the top five discount brokers accounted for 60.1% of the overall NSE active clients, a slight increase from the previous month’s 60.0%. This data indicates the growing dominance of discount brokers in the market, emphasizing their influence on the trading landscape.

Rise in Average Daily Turnover

April witnessed a positive growth in the average daily turnover (ADTO) volume in the capital market, which increased by 3% MoM, amounting to ₹243 lakh crore. This growth was primarily driven by the sustained traction in the Futures & Options (F&O) segment and a strong recovery in cash ADTO (excluding retail). The overall retail ADTO rose by 5% MoM to ₹92 lakh crore, primarily fueled by a 6% MoM increase in F&O ADTO. However, cash ADTO experienced a 7% MoM decline, reaching ₹22,000 crore, as reported by the brokerage.

In conclusion, April proved to be a remarkable month for the Indian equity market, witnessing a strong rebound driven by various factors, including the inflow of foreign institutional investors and the optimistic stance of the RBI regarding interest rates. The rise in trading activities and the total number of demat accounts reflect the growing participation of retail investors. While there was a decline in the number of new accounts added, the market share dynamics highlighted the steady progress of CDSL. However, NSE continues to face challenges with declining active user clients. The increasing dominance of discount brokers and the positive growth in average daily turnover further underscore the dynamic nature of the market. Investors and market participants eagerly await the next developments and potential catalysts that could shape the Indian equity market in the coming months.