The rise of the benchmark Sensex from the 14000 range in January this year to the 17000 range currently, does not appear to have roped in any more retail investors than normal, if the number of new demat accounts are anything to go by.Monthly gross additions to demat accounts at National Securities Depository Ltd have been averaging 1.25 lakh for some time now, said Mr Jayesh Mule, Executive Vice-President, NSDL. At Central Depository Services Ltd (CDSL), monthly additions have been averaging 1 lakh.

A senior official with one of the two largest depository services companies in the country went one step further and cautioned against reading any immediate connection: “There is no direct correlation between the Sensex and the number of accounts opened,” he said.

Since retail investors account for the bulk of demat accounts, would it indicate that this segment, while holding a steady optimistic view of the market, is not easily swayed by market sentiment?

“It must be noted that the current market rally has been entirely led by FIIs. Domestic financial institutions, as well as the retail segment, have been net sellers,” said Ms Anita Gandhi, Head of Institutional Business at Arihant Capital Markets.

Retail might have participated through mutual funds as well; this would not show an addition in demat accounts, she added.

‘settling down’  With the demat concept being rather new in the country, it is still in the process of “settling down” to a steady state, said officials with the depositories. Accounts without PAN numbers had to be frozen from January this year, which did skew the numbers, they said.

Some advise a note of caution in going by additions to the demat accounts.

“There are people who have more than one demat account who may be consolidating them,” said Mr Mule.

On the other hand, there are several people, such as government employees or home-makers, who have had demat accounts for a long time and who start activating them over a period of time, said an official with a Mumbai-based broking firm.

There is bound to be a time lag between a rally in the markets and retail participation, note marketmen.

“At a certain level (of the stock market index) there is a point of inflection,” said Mr Anil Kaul, Head, Retail, ICICIdirect.com.

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“When there are large IPOs you will see an increase in numbers of people trading. People start with mutual funds and IPOs, and when they start feeling comfortable, they may invest directly in stocks,” he said.

The latest figures show that NSDL and CDSL demat accounts number around 1 crore.

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