The spike in volatility, amid election uncertainty, has done little to dent the confidence of retail investors, shows demat account addition and equity mutual fund (MF) investment data.
In May, investors opened a net 3.6 million demat accounts, taking the total to 158 million.
MF data released on Monday pegged the net inflows into equity schemes and SIP investments at new record highs of Rs 34,697 crore and Rs 20,904 crore, respectively.
The retail flows — both through the direct investment and MF routes — helped cushion the impact of the Rs 22,159-crore selling by foreign portfolio investors (FPIs) in May.
MFs alone bought equities worth Rs 46,666 crore last month.
A rise in demat accounts reflects that more households are taking to direct equity investing.
So far, in 2024, 18.8 million new accounts have been added.
The robust returns delivered by the equity markets in the past are attracting more retail investors to direct investing.
The ease of opening accounts due to digitisation and enhanced awareness about equity investing have led to the surge in demat accounts.
On a year-to-date (YTD) basis, the Sensex is up nearly 6 per cent and the Nifty 50 has gained 7.1 per cent.
The broader markets — the Nifty Midcap 100 and the Nifty Smallcap 100 indices — have rallied 16 per cent each.
“The growth in demat accounts reflects people's confidence in India's growth story.
"And, with regime continuity, economic growth and corporate earnings will continue unhindered.
"In May, though, volatility peaked. It happened during the last leg of elections.
"However, the overall sentiment remained positive.
"Domestic flows coming through MFs are pushing the stock prices higher.
"And, retail investors are confident of robust returns for the next few years,” said Prakarsh Gagdani, chief executive officer (CEO) of Taurus Financial Market.
Besides the broad-based gains, a steady stream of initial public offerings (IPOs) boosted demat account numbers.
In May, five IPOs worth Rs 9,606 crore hit the markets, the highest fundraise in a month since September 2023.
Existing investors open new accounts in the name of their family members to enhance their chances of securing an IPO allotment.
While registering new records, the MF industry also achieved new milestones in May.
The robust flows into equity funds and SIP collection took the assets under management (AUM) of active equity funds past Rs 25-trillion for the first time in May.
Data from the Association of Mutual Funds in India (Amfi) shows that active equity funds garnered Rs 34,697 crore last month vis-a-vis Rs 18,917 in April.
The monthly SIP inflows scaled a new high of Rs 20,904 crore.
The SIP account registrations showed a 21 per cent month-on-month (M-o-M) drop from the record 6.3 million registrations in April 2024.
There were 5 million SIP registrations in May, which are still significantly higher compared to 3.6 million average monthly new SIP account openings seen in FY24.
However, the robust SIP account openings in the past two months have not resulted in an equivalent jump in net account additions.
The number of active accounts has gone up by only 3.6 million during the April-May period compared to 4.8 million additions in the previous two months.
This comes as SIP account closures have seen a sharp rise.
According to MF executives, the jump in closures is mostly due to a Securities and Exchange Board of India (Sebi) directive, making it compulsory for fund houses to mark SIP accounts as closed if debit attempts fail for three-consecutive times.
SIP account closures, which averaged 1.9 million in FY24, stood at 3.3 million in April 2024 and 4.4 million in May.
