Demat demand dries up

The market meltdown has spooked investors who were sitting on the fence, waiting for the right time to invest. Stocks have tumbled nearly 55 per cent from its peak in January this year and new investors are wary of entering the market. The growth in the number of new demat accounts, a must for stock trading and a measure of retail participation, has significantly slowed down after June and particularly in the last couple of months. The total number of demat accounts with the country’s two depository service providers, National Securities Depository Services Ltd (NSDL) and Central Depository Services Ltd (CDSL), grew from 1.20 crore at the end of December 2007 to 1.47 crore at the end of June this year. This means 27 lakh new accounts were opened during the six-month period. Investors’ demat accounts with NSDL and CDSL together stood close to 1.5 crore as of November 8. That is, an addition of less than 3 lakh new accounts since July. “First-time investors come in droves when there are high-profile initial public offerings (IPOs). This happened early this year during the public offering of Reliance Power,” said Prithvi Haldea of Prime Database, a Delhi-based firm that tracks the primary capital markets. In January, more than 13 lakh demat accounts were opened. “But since the price crash in the secondary markets in the second half of January, a number of big IPOs were withdrawn. The primary market has almost dried up with no big companies planning to float an initial or follow-on public issue till the conditions stabilise,” Haldea said. The number of demat accounts opened in the first three months of the current calendar year was 21.1 lakh. It was 5.3 lakh between April and June, and only 1.95 lakh between July and September. According to figures available with CDSL, the depository service provider could open only 3,000 demat accounts in October. Total number of investors’ account with CDSL was 53.92 lakh at the end of September and it went up to 53.95 lakh at the end of October.Data for NSDL is not available. The total number of investors’ account with NSDL as of November 8 stood at 95.82 lakh against 95.03 lakh in September — an addition of 79,000 accounts in two months