Is It The Right Time To Invest In The Indian Stock Market?
Developed economies have 30 to 40% equity participation. While the current retail participation levels in the Indian stock market are estimated at only about 7-8% of the population.
Thus, it shows a massive potential of equity investing in India which will result in surging stock prices in the coming years.
Surge of Retail Investors in Indian Stock Market:
The Indian stock market has been witnessing huge participation from retail investors in the past year. Over 3.2 crore new demat accounts were opened in the financial year 2023-24, which is an all-time record high.
Moreover, in just the fourth quarter (January-March 2023), over 1 crore new demat accounts were added – the highest ever quarterly addition of demat accounts in the history of CDSL.
CDSL or Central Depository Services Limited is India’s largest depository, which holds securities like stocks in electronic form on behalf of investors.
The surge in new demat openings shows retail investors are taking a greater interest in stock markets and direct equity investing. Several factors contributed to this spike in retail participation.
One of the prominent factors is easy access to online trading apps that make stock investing convenient.
Also, working from home during the pandemic gave people more time for such activities. Rising market also attracted first-time investors wanting to benefit.
Overall, increased financialization of household savings is a positive sign for the Indian capital markets.
Surge in Stocks for CDSL:
The growth in new retail investors opening demat and trading accounts has contributed to gains for CDSL. Currently, there are a total of 11.5 crore demat accounts with CDSL, holding shares and securities in electronic form.
This huge investor base is a key factor driving CDSL’s business and stock price higher. Impressively, CDSL’s stock price rose 117% in the last one year alone.
The spike in demat accounts handled by CDSL touched record highs last fiscal. Over 3.2 crore new accounts were added in FY24, with an extraordinary 1 crore addition in just Q4.
This shows expanding retail participation in Indian capital markets. As the largest depository service provider, CDSL earns transaction and account maintenance fees from increased operational demat accounts.
Rising transaction volumes due to greater retail trading also boost CDSL’s income. With more Indians commencing their investing journey, the total demat accounts under CDSL are expected to surge further in the coming years.
Scope for Growth in Indian Stock Market:
As of now, there are approximately 15 crore total demat accounts with CDSL and NSDL combined. Allowing for some duplicate accounts, estimates suggest unique investor accounts number around 9 crore.
In comparison, as of 2023 India has issued over 70 crore PAN cards. This implies there is a huge pool of taxpayers who are not currently participating directly in stock markets.
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Read moreThough stock ownership levels have risen, a large proportion of household financial savings is still outside equity markets.
With greater wealth creation and rising incomes, many new investors may enter the markets in the coming years. As a result, we are likely to see a surge in the stock prices in the coming years.
Moreover, brokers and exchanges also stand to gain massively from a larger influx of retail traders and investors.
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