MUMBAI: India’s capital market has surged significantly over the past four years as the number of demat accounts in the country has surged more than fourfold, reaching 17.9 crore (179 million) by October 2024, says a report by Motilal Oswal.
However, the report highlighted that only 3 per cent of the country’s population invests in mutual funds, underscoring the potential for further growth. The demat penetration in India also remains low at just 12 per cent, compared to 62 per cent in the United States.
“The Indian capital market has experienced remarkable growth over the past five years from all perspectives. Demat accounts surged 4.4x (179m), NSE active accounts surged 4.9x (49m), Unique MF investors jumped 2.4x (50m), and Monthly SIPs climbed 3.2x (INR253b) from FY20 till October 24. Demat penetration at 12 per cent vs. 62 per cent for USA”, it said.
The report highlights the impressive expansion across various facets of the financial market. Active accounts on the National Stock Exchange (NSE) grew 4.9 times to 4.9 crore (49 million), while the number of unique mutual fund (MF) investors increased 2.4 times to 5 crore (50 million). Monthly Systematic Investment Plan (SIP) contributions also tripled, reaching Rs 25,300 crore (253 billion) during this period.
Despite this growth, the report noted that India still lags behind global benchmarks. For instance, the mutual fund industry’s assets under management (AUM) as a percentage of GDP stand at 17 per cent, far below the global average of 65 per cent. Similarly, stock market turnover velocity in India is approximately 70 per cent, compared to 115 per cent for NASDAQ in the United States.
The report predicts robust growth in the coming decade, driven by favorable demographics and rising incomes. Over 100 million people are expected to join the workforce, while an equal number of households will enter the middle-income class.
Additionally, the High Net Worth Individual (HNI) and Ultra-High Net Worth Individual (UHNI) segments are growing at an annual rate of 12 per cent, a trend expected to continue. It said “Over the next decade, the demographic dividend will accelerate, with over 100m people joining the workforce and about 100m households entering the middle-income class”.
The report also mentioned that the mutual fund industry has seen remarkable progress, with AUM growing at a compounded annual growth rate (CAGR) of 21 per cent to reach Rs 69 trillion by October 2024. Equity AUM grew even faster at a 29 per cent CAGR, supported by a threefold rise in SIP flows.
With SIPs becoming increasingly popular, the report concludes that India’s capital market is poised for continued expansion, supported by rising financial literacy and digital adoption. (ANI)