Demat account openings at domestic brokerage firms have continued to surge in the early part of FY24, driven by a widespread bullish trend in the stock market, consistently low brokerage fees, and a wave of initial public offerings (IPOs), according to The Economic Times report.

Also read: Azad Engineering Files Draft Papers With SEBI To Raise Funding Via IPO

The industry saw a reduction in its active client base during this phase as more market participants reduced their trading activity due to the significant market fluctuations. An active client is defined as someone who engages in trading with their broker at least once a year.

The total number of demat accounts as on August 31 stood at 12.65 crore, up 10.7% from March 31 this year. The industry had 11.43 crore demat accounts then.

"Demat account addition is linked to market growth. As markets were rising and there was good activity in terms of IPO issuances, you saw more demat accounts getting opened,” Sandeep Chordia, joint president at Kotak Securities, was quoted as saying by ET.

Since April 1st, the Nifty has experienced an approximate gain of 13.12%. Over the same period, the Nifty Mid-Cap 150 Index has surged by 33.37%, the Nifty Small-Cap 250 has seen an increase of 39.17%, and the Nifty Micro-Cap 250 has made substantial progress, surging by 58.12%.

The Demat account openings in FY24 continue the trend of an expanding client base that began in March 2020. At that time, the Covid-19 pandemic-induced shutdown prompted individual investors to enter the market directly. Prior to this, these investors predominantly relied on equity mutual funds. 

Additionally, with fixed deposit interest rates remaining at historically low levels during that period, there was a noticeable increase in interest and participation in trading activities.

From March 31, 2020, when the total number of demat accounts stood at 40 million, there has been a remarkable 210% surge. Brokers anticipate that this trend of increasing account openings will persist, particularly driven by smaller cities and towns across the nation.

Also read:Despite Rising Retail Inflation, RBI Likely To Keep Repo Rate Unchanged For Fourth Consecutive Time

"The growth from 2 crore demat accounts 4-5 years back to 12 crore was a momentum that we will continue seeing as the number of accounts goes up to 30 crore in the coming years, with the participation of tier 2, tier 3 & beyond cities and towns," Kunal Sanghavi, chief financial officer at HDFC Securities, was quoted as saying by ET.