Demat account openings at record high, total accounts near 14 crore mark

As the domestic equity market keeps on making new peaks every other day, a similar surge in new Demat account additions is also being seen. In December, the total new Demat account openings touched a new high of 42 lakh, taking the number of total Demat accounts to 13.93 crore.
The addition of 42 lakh new accounts in December is 50% higher than what was seen in the month of November when 28 lakh.The number of new Demat account openings is directly proportional to the surge in stock prices. Typically, a bull market attracts more number of new investors and whenever the market hits a rough patch the number of active traders and investors also tends to decrease.

The calendar year 2023 saw the headline index Nifty ending at record high levels following a 20% surge. The rally was much sharper in the broader market where mid and smallcap indices went up around 50-55%.

Market data shows that FII inflows into Indian equities stood at $21.4 billion in CY23 vs outflows of $17 billion in CY22. During the last eight years, FIIs have invested $51.8 billion cumulatively in the Indian market, with only two years of outflows.

DII inflows into equities in CY23 remained strong at $22.3 billion vs $32.2 billion in CY22. With just one year of outflows since CY16, DIIs have invested $102.8 billion cumulatively over the last eight years.

“As CY23 was marked by multi-year high-interest rates, concerns about banking crises in the US and Europe, and geopolitical uncertainties, CY24 is likely to see some moderation in these issues, especially in interest rates. With global liquidity tightening nearing its end, a healthy domestic macro and micro environment, strong domestic and retail participation, and expected political continuity post-2024 general elections bode well for policy momentum in India,” Motilal Oswal said.

The brokerage expects continued optimism in the market and maintains a positive outlook and an overweight stance on sectors such as BFSI, Industrials, Real Estate, Auto, and Consumer Discretionary.

The Nifty is now trading at a 12-month forward P/E ratio of 19.6x, near its long-term average of 20.2x.

Japanese broking firm Nomura has set out a target of 24,260 on Nifty by factoring in continued disinflation and a fall in yields, a modest growth slowdown globally, benign oil/commodity prices, and a favorable outcome of the 2024 general elections.