Increase In New Demat Accounts A Good Sign!

The ongoing freefall, it would seem, would keep investors away from the markets and wait for the right opportunity to return and start investing again. But going by the number of demat accounts that are being opened, it does look like investors are in high spirits, which certainly is a good sign for the markets. Geyatee Deshpande finds out the reason behind such excitement and how the statistics are reflecting this new trend

- Geyatee Deshpande

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.