The Nifty 50 Index may have declined nearly 6 percent so far this fiscal, but that's not deterred investors from opening demat accounts.
The National Securities Depository Ltd. and Central Depository Services Ltd. together added over 12 lakh demat accounts between April and July, registering a cumulative growth of 12.4 percent over last year in the first four months of 2019-20, data compiled by BloombergQuint showed.
While the average monthly growth of new demat accounts opened with CDSL was about 17 percent in FY20 so far, the pace was a little over 8 percent at NSDL.
There has been no impact on new demat accounts despite the market conditions, Nageswara Rao, managing director and chief executive officer at NSDL, told BloombergQuint. “Most of the new demat accounts opened are from unique PANs (permanent account numbers) and new holders,” he said. “Bulk of the growth is coming from larger cities but account opening and penetration is pretty good for smaller towns and cities as well.”
CDSL's market share rose 80 basis points over the previous quarter to 49.3 percent as on July due to higher growth in FY20.
According to Nilesh Doshi, co-founder at ProsperoTree.com, a boutique investment research and advisory firm, the growth of demat accounts in India is clearly in favour of CDSL for the last three years. “If you analyse the shareholding break-up of all the listed companies, CDSL is used by public whereas NSDL is used by promoter shareholders.”
For CDSL, the growth is more encouraging as public shareholders of listed companies typically sell shares many times over the years giving more transactions and revenues, Doshi said. NSDL, however, will typically have investors who aren't going to see major changes in their shareholding and won't be a key revenue driver, he said.
More Unlisted Companies Register
It's not just new demat accounts that picked up pace in FY20. The number of companies registered with both NSDL and CDSL went up by nearly 30 percent on a yearly basis. Their count stood at 41,102 as of July-end.
According to Rao, bulk of the new companies registered for demat with NSDL are privately held firms. That's after the government made dematerialisation of shares mandatory even for such firms.
Doshi said the co-operative housing societies and unlisted companies have tied up with NSDL. Most of the unlisted shareholders use the demat channel through banking network where NSDL has an edge, he said.
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