MUMBAI : New demat account openings rose the most in nine months in May, fuelled by a broader market rally and record derivatives volumes. At the end of the month, the total number of demat accounts stood at 118.15 million, up 2.15 million or 32% from April.
This was the highest monthly increase since August, when new account additions shot up 73% or 2.55 million, according to depository data cited by Motilal Oswal Financial Services (MOFSL). Central Depository Services (India) Ltd accounted for 86.16 million accounts, while National Securities Depository Ltd accounted for 31.99 million accounts as of 31 May.
“Mid-caps and banks led the rally with the Bank Nifty hitting a record high and the Nifty Midcap 100 making a fresh high in May,” said Siddhartha Khemka, head of research (retail), MOFSL. “FPI (foreign portfolio investors) buying stepped up, which, in turn, attracted more domestic investors to open accounts to trade in the cash and derivatives markets.”
On 31 May, the 12-constituent Nifty Bank touched a record 44,498.60, while the Nifty Midcap 100 hit a record 33,814.70. While the Bank Nifty has trended marginally lower since then, the mid-cap index has been making fresh highs, making a newer record of 34,870.20 on 14 June. Bank Nifty closed at 43,988 on Wednesday.
With the rush for demat accounts accompanying the flood of retail money into the risky futures and options (F&O) segment, the market regulator has its task cut out to protect unsophisticated investors.
Khemka added that the spurt in the broader markets also induced investors to rush into the derivatives segment of National Stock Exchange of India Ltd (NSE), which saw a record 5.75 billion contracts being traded. The jump in such trades, largely on index options like the Nifty and the Bank Nifty, comes even as the Securities and Exchange Board of India (Sebi) has directed brokers to flag derivatives trading risks for retail customers’ benefit on every derivatives order.
Sebi has directed brokers to alert investors that nine out of 10 derivatives traders lose money betting on Nifty and Bank Nifty options.
Incremental account opening picked up after FPIs pumped ₹43,838 crore, the most in nine months, into Indian shares in May. Their favourite picks were financial and auto and auto-ancillary stocks that month. “On the derivatives front, FPIs’ long-short ratio crossed 50%, indicating that FPIs now hold more long positions relative to short positions,” said Ashwin Ramani, derivatives & technical analyst at SAMCO Securities.
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Updated: 15 Jun 2023, 12:26 AM IST