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Maharashtra, Gujarat and UP lead the race in new demat accounts

  • The number of demat accounts jumped to 11.45 crore, recording a growth of 43% in the last one year, according to the BSE registered investors data.
  • Analysts say most of the traction came through mutual funds, which has shown consistent inflows in monthly SIP contribution.
  • SIP inflows hit a record high of ₹12,693 crore in August 2022.

The number of demat account holders in India has grown rapidly in the last couple of years, on the back of greater financial literacy and growing awareness about investments and markets.

One hard lesson the pandemic has taught the world is the importance of savings and investments, which is now being reflected in the growth in demat accounts.

Overall the number of demat account holders has increased to 11.45 crore, recording a growth of 43% in the last one year, according to BSE’s registered investors data. It is important to note that in a country with about 140 crore citizens only about 8% of people invest in financial instruments, displaying low penetration.

Most investors are from Maharashtra and Gujarat
The highest number of investors in the market (2.31 crore) are from Maharashtra, mainly because of Mumbai, the financial capital of the state. The next in line is Gujarat, the state with enthusiastic investors who have contributed to 1.18 crore demat accounts.

Despite being the most populous state in the country, Uttar Pradesh ranks third. However, these are the only states with over a crore demat accounts.

Next come the states of Rajasthan, Karnataka, West Bengal, Tamil Nadu, Madhya Pradesh and Andhra Pradesh — which have anywhere between 50 lakh to 66 lakh demat accounts each. Bihar, Haryana, Telangana, Kerala, Punjab, Odisha and Assam are the states with over 20 lakh accounts each.

The Himalayan region of Ladakh has the least number of demat account holders at 242

Demat accounts in India
Maharashtra 2.31 crore
Gujarat 1.18 crore
Uttar Pradesh 1.04 crore
Rajasthan 65.58 lakh
Karnataka 65.05 lakh
West Bengal 61.02 lakh
Tamil Nadu 59.39 lakh
Madhya Pradesh 55.65 lakh
Delhi 54.54 lakh
Andhra Pradesh 50.59 lakh
Bihar 37.67 lakh
Haryana 37.22 lakh
Telangana 35.98 lakh
Kerala 27.41 lakh
Punjab 26.14 lakh
Odisha 25.14 lakh
Assam 23.77 lakh
Jharkhand 17.96 lakh
Chhattisgarh 11.06 lakh
Uttarakhand 9.86 lakh
Himachal Pradesh 5.68 lakh
Jammu & Kashmir 4.60 lakh
Chandigarh 2.97 lakh
Goa 2.47 lakh
Tripura 1.25 lakh
Manipur 1.08 lakh
Pondicherry 1.04 lakh
Meghalaya 51,616
Dadra and Nagar Haveli 37,409
Nagaland 35,076
Arunachal Pradesh 30,776
Sikkim 29,305
Daman and Diu 25,861
Andaman & Nicobar 19,318
Mizoram 11,909
Lakshadweep 1,191
Ladakh 242
Total 11.45 crore

Analysts say demat accounts may continue to grow rapidly
The growth in demat accounts picked up after the pandemic since markets witnessed high activity. Smaller towns are showing interest in opening demat accounts, analysts said. Most of the traction came through mutual funds, which has shown consistent inflows in monthly SIP contribution. SIP inflows hit a record high of ₹12,693 crore in August 2022.

“It is very evident with the maximum number of SIP participation coming from smaller cities that demat accounts will grow manifold, as mutual funds reach out through banks and intermediaries (financial advisors). I think the undertone in tier II and tier III is even more sharper than in the metro cities,” Sanjiv Bhasin, director at IIFL Securities, told Business Insider India

In fact, the number of retail folios in the mutual fund industry stood at an all-time high of 10.89 crore as of August 31, 2022.

The assets under management of the mutual fund industry has grown more than five times in the last 10 years from ₹7.53 trillion in 2012 to ₹39 trillion right now.

The Indian mutual fund industry has grown multifold since it launched the ‘Mutual Funds Sahi Hai’ campaign in 2017, which did wonders for the industry. Moreover, making the know your customer (KYC) norms in mutual funds more convenient and paperless has helped immensely as well.

“KYC has become easier and while traveling in smaller cities, I have seen that there is a huge amount of demand for SIPs and an urge to know how to invest in equities. These are small- ticket-size investors and hence investing through mutual funds seems more attractive to them,” said Bhasin.

N S Venkatesh, the CEO of Association of Mutual Funds in India, believes that a lot more needs to be done to spread the word across the country especially in tier II and tier III cities to encourage investments. Despite the rise in demat accounts, the percentage of the total population investing in financial instruments is still a paltry 8%. A lot needs to be done to ensure more people can reap the benefits of India’s growth story.

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