India's retail investing boom may not be as robust as headline demat account numbers suggest.
While the country has amassed a record 21.6 crore demat accounts as of December 2025, only around 5 crore of them are actively used, leaving nearly 16.6 crore accounts dormant or inactive. The stark gap has come under fresh scrutiny after the National Stock Exchange (NSE) reported a record decline in active investors during fiscal year 2026.
The NSE's active investor base fell 7% year-on-year to 4.58 crore accounts in fiscal year 2026 from 4.92 crore in finacial year 2025, marking the first annual contraction in three years and the steepest decline on record. Nearly 35 lakh active accounts were lost during the year, with more than 70% of the drop, around 26 lakh accounts, coming from clients of leading discount brokers such as Zerodha, Angel One and Upstox.
The decline raises a broader question: how many of India's rapidly growing demat accounts are actually being used?
Data suggests only about 23.1% of the country's 21.6 crore demat accounts have witnessed at least one transaction in the past year, while roughly 76.9% remain inactive. The inactive pool includes accounts that have seen no trading activity for over a year as well as duplicate accounts opened across multiple brokerage platforms.
ALSO READ: Temasek-Backed Milky Mist Pauses Rs 2,035 Crore IPO Amid Market Volatility, Sources Say
Market experts point to three key reasons behind the inactivity.
The first is the surge in "one-time" IPO investors. During the bull market years, millions of retail investors opened demat accounts solely to participate in highly sought-after IPOs. Many of these accounts were abandoned after investors either failed to secure allotments or exited immediately after listing.
The second factor is account duplication. The rise of digital brokerages and paperless onboarding made opening multiple demat accounts effortless. As a result, many investors maintain accounts with several brokers but actively use only one, leaving the rest dormant.
The third and perhaps most significant factor is what industry participants describe as "F&O burnout". Regulatory studies have repeatedly highlighted that a majority of retail traders in the Futures & Options segment incur losses. After suffering losses, many investors stop trading altogether instead of shifting towards long-term investing, leaving their accounts inactive.
Himanshu Pandya, founder of HP Private Wealth, said the decline in active investors exposes the gap between account openings and genuine market participation.
"India's celebrated retail investing boom is facing a sobering reality check. The unprecedented contraction of 35 lakh active NSE investors in FY26 exposes a glaring truth: aggressive onboarding does not equal genuine market participation," he said.
Pandya warned that the growing stockpile of dormant and nil-balance accounts also poses operational and regulatory risks, including the potential misuse of inactive accounts for fraudulent activities.
Echoing similar concerns, Narinder Wadhwa, Managing Director of SKI Capital Services, said dormant accounts create a "silent but serious vulnerability" within the capital market ecosystem.
"When millions of accounts sit idle, they create a hollow layer in the depository infrastructure that escalates operational costs and drastically heightens Anti-Money Laundering and fraud risks," Wadhwa said.
The trend also highlights another reality often overlooked in discussions around retail participation. Due to widespread duplication of accounts, market analysts estimate India's actual unique investor base stands closer to 12-13 crore individuals rather than the headline 21.6 crore account figure.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.