IPO, Bonds, T+0 Settlement To Boost Demat Accounts: NSDL VP
Sebi’s move to make corporate bonds affordable for the retail investors will significantly boost the number of demat accounts, says Vagal
With the Indian Stock market soaring to new highs, initial public offerings (IPOs), SIPs and regulatory intervention have been the major factors in the growth of the market.
The investments in mutual funds through the systematic investment plan (SIP) route in January stood at Rs 18,838 crore, crossing the Rs 18,000 mark crore for the first time.
Likewise, the demat accounts in India also soared to record numbers with the total demat account increasing from 39.4 million in December to 143.9 million in January 2024. Moreover, the penetration of demat accounts has reached 99 per cent of pin codes in India. India has two depositories for the storage of securities namely, National Securities Depository (NSDL) and Central Depository Services (CDSL).
Securities and Exchange Board of India (Sebi) proposed to reduce the face value of corporate bonds to Rs 10,000, to make it affordable for retail investments and generate higher liquidity.
“The Sebi’s move to make corporate bonds affordable for the retail investors will significantly boost the number of demat accounts in India as the influx of retail investors will increase to invest in corporate bonds. Demat account is a prerequisite for investment in bonds, and tech-enabled brokers can avail this opportunity for cross-selling of equity, mutual funds and other products with the same demat account,” said Prashant Vagal, Executive Vice President, NSDL.
India has significantly low retail participation compared to the global average. In India, only 4.7 per cent of people invest in mutual funds, whereas only 1.3 per cent have direct exposure to stocks. Demat accounts reflect the retail participation, however surge in demat accounts is also attributed to IPO issues. Such accounts are opened exclusively for the IPO applications, which either become dormant or accessed for trading and investment, added Vagal.
Additionally, Sebi also proposed a T+0 settlement which will enable the investors to receive the delivery of purchased equities on the same day. Besides, the extended trading hours for the market are also in discussion.
Vagal further reiterated, "The regulatory intervention for T+0 settlement will enhance liquidity and participation of retail investors in the equity markets. The same-day settlement will encourage the investors to park their funds in the form of equities and withdraw it according to their needs. Besides, the extended trading hours will also have a significant impact on liquidity issues which prevailed due to set market timings. The higher retail participation will ultimately boost the demat accounts and vice versa."
He also highlighted that new-age brokers have eradicated geographical barriers to creating demat accounts. Push for monthly. SIPs through mutual funds campaigns and the strength of the Indian market have been pivotal in demand growth.
