Analysis of DEMAT Accounts vs. Mutual Fund SIPs (Jan-Nov 2024)

The first half of 2024 has been a remarkable period for the Indian financial markets, witnessing significant activity in both mutual fund SIP registrations and DEMAT account openings. These trends reflect the growing financial literacy and increasing retail participation among Indian investors. This article explores the key developments from Jan to Nov 2024, focusing on mutual fund SIPs and DEMAT accounts, and their implications for the broader investment landscape.

In parallel with the surge in SIP registrations, the Indian equity market saw the addition of over 2.3 crore new DEMAT accounts in the first half of 2024. This reflects a burgeoning interest in direct equity investments, driven by factors such as increasing stock market awareness, ease of digital account opening, and improved access to online trading platforms.

The rise in DEMAT accounts is a testament to the shift in investor behaviour, with many individuals seeking to capitalize on market volatility and explore equity as a high-return asset class. The strong growth in DEMAT accounts also indicates that retail investors are becoming key players in the equity markets, contributing to greater market depth and resilience.

 The growth of SIP and Month-by-month comparison of the number of DEMAT accounts and new mutual fund (MF) SIPs (both measured in lakhs) from January 2024 to November 2024. Additionally, it compares the total growth in DEMAT accounts and MF folios during this period.

 

1. Monthly Trends:

DEMAT Accounts:

• Peak: The highest number of new DEMAT accounts (46 lakhs) was recorded in July 2024, indicating heightened investor interest.
• Lowest: The lowest number of DEMAT accounts opened (31 lakhs) occurred in March and April 2024, representing a slowdown during this period.
• Decline in Nov-24: November witnessed a sharp drop to 32 lakhs, marking a consistent decline since the peak in July.

Mutual Fund SIPs:

• Peak: The highest number of new MF SIPs (60 lakhs) was also recorded in July 2024, showing alignment with the DEMAT peak.
• Lowest: March 2024 saw the lowest addition of SIPs (36 lakhs), slightly recovering in April.
• Sustained Growth: Unlike DEMAT accounts, MF SIPs saw relatively stronger numbers toward the year-end (42 lakhs in Nov 2024), reflecting sustained interest in mutual funds.

 

2. Comparison of DEMAT vs. MF SIPs:

• July-August: MF SIPs consistently outperformed DEMAT accounts, especially in July (60 vs. 46 lakhs) and August (55 vs. 43 lakhs). This could indicate a shift toward long-term investment strategies during these months.
• November Decline: Both DEMAT accounts and MF SIPs declined by November, but MF SIPs retained a stronger foothold with 42 lakhs compared to 32 lakhs for DEMAT accounts.

 

3. Growth Analysis (Jan-Nov 2024):

Total Accounts/Folios:

• DEMAT Accounts: Grew from 14 crores in January to 18 crores in November, a total growth of 29%.
• MF Folios: Increased from 18 crores in January to 23 crores in November, representing a growth of 28%.

Observations:

• The growth rates for both DEMAT accounts and MF folios are nearly identical, reflecting parallel trends in market participation.
• Mutual funds appear to be more stable, as evidenced by the less dramatic monthly fluctuations compared to DEMAT accounts.

 Conclusion:

The data highlights significant retail participation growth in equity markets and mutual funds in 2024. While the growth rates for DEMAT accounts and MF folios are similar (29% vs. 28%), the sustained interest in MF SIPs toward year-end demonstrates a robust appetite for systematic investments.

1. July 2024 Boom: The sharp rise in both DEMAT accounts and MF SIPs in July highlights a period of heightened financial activity. Possible drivers could be market rallies or favorable policy announcements.
2. Investor Behavior: The preference for MF SIPs in the latter half of the year suggests increased interest in systematic, long-term investment strategies over direct equity investments.
3. Decline Toward Year-End: The slowdown in DEMAT accounts by November might indicate reduced trading interest or seasonal factors like holiday spending. However, SIPs remained relatively resilient, reflecting investors' continued trust in mutual funds.

Parallel to the financialisation of savings, the digital revolution has made investing more accessible, affordable, and user-friendly. The proliferation of digital platforms, mobile apps, and robo-advisors has simplified the process of opening DEMAT accounts, starting SIPs, and managing portfolios. These trends are not only reshaping how Indians save and invest but are also strengthening the foundations of the economy by deepening financial markets and boosting capital formation. As technology continues to evolve and financial literacy spreads further, these shifts are likely to accelerate, paving the way for a more inclusive and resilient financial ecosystem in India.