Mumbai: Indian brokerages are facing a paradox as the number of demat accounts continues to rise, yet the proportion of active traders is declining. According to a Mint analysis, active clients constituted 19.1% of India's 23.2 crore demat accounts in the three months through June of fiscal 2027, down from 26.32% in FY2024. This trend reflects a significant drop in trading activity despite the total number of accounts increasing from 15.2 crore.
Decline in Active Clients
The analysis, based on data from the National Stock Exchange (NSE) and the Securities and Exchange Board of India (Sebi), revealed that the ratio of active clients fell by 5.22 percentage points to 20.1% in fiscal 2026 compared to the previous year. An active client is defined as an investor or trader who has executed at least one transaction in the past 12 months. Brokerages attribute the slowdown to a combination of factors, including weaker market returns, tighter regulations on derivatives trading, and geopolitical tensions that have made retail investors more cautious.
Reasons for Caution
Dhiraj Relli, managing director and CEO at HDFC Securities, noted that many new accounts opened during the post-pandemic boom were intended for short-term goals, such as IPO applications or quick trading gains. However, the lack of large IPOs, losses in recent listings, and uncertainty around market valuations have led many investors to adopt a wait-and-watch approach. Relli stated,
In the absence of any large IPOs, listing losses in IPOs, heavy retail losses in derivatives trading, along with uncertainty around valuations and global tensions, have also encouraged a wait-and-watch approach.
The decline in active trading could affect brokerage revenues and overall market liquidity. Retail investor sentiment appears to be shifting towards caution, which may lead to reduced participation in equity markets. Investors will watch for upcoming IPO announcements and market performance indicators to gauge potential recovery in trading activity.