The increasing trend of demat account additions in the Indian capital market indicates a growing interest in using the market as a channel for financializing savings. According to SBI’s economic research department, there has been a significant rise in the number of demat accounts over the past few years, with an average addition of 3 crore new accounts every year since 2021. This year, the number of demat account additions is expected to cross the 4 crore mark.
One interesting trend highlighted by the research is the increasing participation of women in individual investor registrations. The report notes that nearly 1 in 4 investors are now women, showing a gradual improvement in gender inclusion within the financial markets. The report also points out that there has been a decline in the mean/median age of investors, with a growing number of younger individuals entering the market.
The savings of households in ‘Shares and debentures’ have also seen a significant increase, reaching about 1% of GDP in FY24, up from 0.2% in FY14. This indicates that households are increasingly contributing to the capital needs of the country. Additionally, the share of net financial savings in total household savings has increased, with more than 80% of adults in India now having a formal financial account.
The report also highlights the changing landscape of financial savings by asset class, with a decline in the share of bank deposits and currency in financial savings. New avenues of investment, such as mutual funds, have emerged as popular choices for investors. The increasing share of mutual funds in financial savings has made them the most preferred instrument for financialization of savings.
Overall, the research suggests that a higher market capitalization contributes to a positive impact on the real economy, driving overall economic growth. The increasing participation of women and younger investors, along with the emergence of new investment avenues, are shaping the financial landscape in India and paving the way for a more inclusive and vibrant financial ecosystem.
