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Updated February 1st, 2024 at 07:56 IST

4.2 million demat accounts opened in Dec: What does it mean for investment growth?

Fuelled by FOMO, digitisation, and financial literacy, the surge continues in the market's upward trend.

User In December 2023, 4.2 million demat accounts were opened
User In December 2023, 4.2 million demat accounts were opened | Image:Freepik
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Rise in demat craze: The Indian stock market saw a substantial uptick as 4.2 million new demat accounts were opened in December 2023, indicating a growing interest in equities among Indian investors. This surge is attributed to factors such as increased financial literacy, digitisation, user-friendly trading platforms, and a perceived fear of missing out (FOMO) on the market's upward trend.

FOMO driving surge

Many financial experts suggest that the record number of demat accounts can be linked to the FOMO phenomenon, with investors aiming to capitalise on the market's record highs and widespread rally. Additionally, the active IPO market is encouraging investors to open demat accounts for participation in initial public offerings.

"The expansion of the retail investor base, particularly from small towns and various parts of the country post-Covid, has contributed significantly to the surge in demat accounts," said Agam Gupta, Executive Director, Share India Fincap. While acknowledging the positive impact on retail volume and participation, Gupta advises caution, stressing the importance of adopting a long-term investment mindset and avoiding speculation in penny stocks amidst the current market volatility.

Investor momentum rising

The trend of opening new brokerage accounts signifies a sustained momentum and increased participation of investors in the equity market. Experts view this as a positive development for both the stock markets and investors, foreseeing opportunities in the India growth story over the next decade. However, Gupta emphasises the need for customised expert advice to guide new investors based on risk and return, setting realistic expectations, and aligning investments with goals.

Digitisation in investment platforms is highlighted as a contributing factor to the deepening of the investing industry. While it has made the initiation of investing more accessible and location-agnostic, challenges lie in ensuring investors remain committed to wealth creation amidst information clutter. He underscores the importance of addressing these challenges to prevent new investors from having an unsatisfactory experience.

Investor awareness priority

While the surge in demat accounts reflects the deepening of the securities market and greater financial inclusion, there is a call for enhanced investor education and consumer protection. According to experts, sustaining this momentum and ensuring well-informed decision-making amongst new investors are crucial considerations in the continued growth of the investment landscape in India.

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Published January 26th, 2024 at 10:07 IST

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