Dalal Street Investment Journal|May 25, 2020
The markets are in no mood to continue the recovery they displayed in April with May trying to make investors realise the ground realities faced by the economy. However, the recent volatility in the markets has done what few would have imagined – it has led to record opening of demat accounts! Yes, it is true that the pace of new demat account opening has increased in March and April, as is evident from the data provided by the Central Depository Services Limited (CDSL). What is more interesting to note is that the spur in account opening is also being witnessed in the US markets.
Discount brokers like Charles Schwab, TD Ameritrade and Etrade have shown increase in trading accounts for Q1 2020 when compared to a similar quarter a year back. In fact, the jump in accounts for Charles Scwab, TD Ameritrade and Etrade is 58 per cent, 149 per cent and 169 per cent, respectively. This happened in the Q1 of 2020 (CY) when the markets entered into its fastest bear phase in history and the DJIA fell by close to 35 per cent. The data of the US markets reveal that first-time investors who are mostly inexperienced opened online broking accounts. These fresh investors saw the downturn created by the pandemic as as an opportunity to enter the markets.
If we go by the data of account opening at CDSL, almost 12 lakh new investors have opened demat accounts in March and April alone. March saw 6.18 lakh new accounts while April saw another 6 lakh accounts. These figures are important when we consider the fact that 42 lakh new demat accounts were opened in the prior 11 months i.e. between April 2019 and February 2020. That means on an average the new demat accounts opened per month since April 2019 to February 2020 were approximately 381,000, which jumped to 6+ lakhs in March 2020 and April 2020. This reflects a neat 36+ per cent jump in new demat accounts for March and April. As is the trend, majority of the new demat accounts have been opened with discount brokers. Zerodha itself has almost 3 lakh new demat accounts opened in two months i.e. March and April, reflecting a big jump in volume for the discount broker. Zerodha is the biggest online discount broker in India and has seen monthly accounts double since February this year. According to the management, almost 20 per cent of the new accounts opened belong to first-time investors who are under the age of 30 years.
Prakarsh Gagdani, CEO, 5paisa.com
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May 25, 2020