In the December Quarter of 2024, the number of total Demat accounts opened in the quarter highlighted a drop from the previous quarters. A sharp decline in new account openings has been witnessed owing to significant corrections in the market and a higher level of volatility. Why did the numbers drop? Is it just the volatility and correction or there is more to it? Let’s find out in today’s blog here.
New Demat Account Registrations
In the October –December quarter of FY25, the number of Demat accounts opened was 9.77 million however, the demat account growth rate in India declined 26.3%. It has been the sharpest decline ever in the previous quarters.
It even looks sharper as the September quarter witnessed one of the highest-ever Demat account registrations in India with 13.25 million accounts registered during the period.
Factors behind the Slowdown
The primary reason behind the slowdown is the correction that dragged the entire market down in the previous quarter. The Nifty 50 tanked by around 8.5% while the Sensex was dragged 7.3% behind. It was the steepest market correction since June 2022, which took a toll on new Demat account openings. It was not just the Nifty 50 or BSE Sensex, the broader market indices also declined massively during the period. The BSE Midcap was down by 6% during that time while the BSE smallcap was 3.5% down, both registering their poorest performance since the middle of 2022 and March 2023 respectively.
Apart from the correction, the declining markets were also a result of uncertainties in the global arena. One of the biggest global cues was Donald Trump’s win in the US presidential elections, which took a toll on the entire market globally. The number of federal rate cuts can be low after his win and this thought has dragged the market down as well.
Coming to the domestic front, the poor corporate earnings results in Q2 were a major reason for the market to go down as well. Economic growth was sluggish during the previous quarter, which made all major agencies and even RBI reduce their growth expectations. The inflationary pressure was again on the rise during the quarter, which also played a pivotal role in the market decline and reduced the interests of investors.
Finally, the SEBI’s stringent norms for the derivatives trading which it introduced in the December quarter also took a toll on the market activities. It dampened the investors’ enthusiasm and interest as opportunism in the market dropped. In December, the combined average daily turnover of Bse and NSE in the F&O segment was down to ₹ 280 trillion from ₹ 442 trillion in November. Even the volumes of trading declined massively in December by around 48% compared to September.
It was for the second month in a row, that the index futures turnover dropped and stock futures, options, and index options turnovers declined for the third consecutive month.
Wrapping up
From a growth of 21.4% in the September quarter, the demat account opening this quarter was down by 26.3% which has been a result of market corrections mostly. Having said that, the markets are turning around, and it will be interesting to see how the final quarter of FY25 turns out to be for the market and the investors.
Source: MoneyControl
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