This story is from April 14, 2014

Record 53,000 demat accounts closed in February

The ongoing bull run is yet to attract retail investors to Dalal Street.
Record 53,000 demat accounts closed in February
KOLKATA: The ongoing bull run is yet to attract retail investors to Dalal Street. Despite the sensex soaring to over 22,500 from below 18,000 and the nifty rising to 6,800 from 5,500 levels, a record number of demat accounts have been closed in February and March. The number of new demat accounts also lost steam during the period. Since demat accounts are almost seen as a necessity to trade on the bourses, a large number of closures and the slowing pace of new accounts indicate dwindling investor interest in the stock market.
The country’s two main depositories — Central Depository Services (CDSL) and National Securities Depository (NSDL) — have together seen over 52,500 demat accounts being closed in February alone. This is the highest number of closures in a single month since demat accounts were introduced in mid-90s. In addition, in March another 23,000 demat accounts were closed. “The number of demat accounts closed in February was a record in itself. The average monthly closure of demat accounts is between 5,000 and 10,000,” a CDSL official said.
According to the official, the number of new accounts being opened has also come down considerably in the last one year. “The average new account addition per month is around 60,000-70,000 compared to over one lakh per month during the 2008 bull-run. In February, the net addition was only 7,000 taking into account that a huge number of accounts were closed,” the official added. The total number of demat accounts in the country is now 2.30 crore, up from 1.80 crore in 2008.
Kamal Parekh, chairman, Stewart Securities and former president of Calcutta Stock Exchange, said these numbers show that retail investors are still avoiding the stock market. “Only 50 lakh accounts have been added in six years… this should have been more than a crore,” Parekh said.
“In 2013-14, around seven lakh accounts have been added. The number could have been much higher if there was retail participation in a big way,” added one source. Parekh pointed out that as there is not much movement in mid-cap stocks, which is the favourite of retail investors; they are not venturing into the stock market.
Uddalok Bose, head-retail business, Abira Securities, agreed: “Yes, a rally in mid-cap is important for retail participation.” The Rajiv Gandhi Equity Scheme (RGES) aimed at encouraging retail participation in the market is not getting good response either, he said.
Hemal Kampani, director, VCK Capital, said hapless retail investors have no other option than to close down demat account as it is not possible for them to pay annual charges when they are not trading in stocks. “Portfolios of a large number of retail investors have been eroded. So a lot of them are closing demat accounts after selling remaining stocks at whatever price they can get in the current market,” he said.
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