Demat account additions fall 22% in FY26 amid rising market volatility

After a record surge in FY25, the pace of new demat account additions moderated in FY26 as weaker market returns and rising volatility weighed on retail sentiment.

Net additions slowed to about 32 million in FY26, even as the total number of demat accounts crossed 225 million, according to data from depositories NSDL and CDSL.

This represents a 22 per cent decline from FY25, when a record 41 million accounts were added, driven by a strong bull run, robust initial public offering (IPO) activity and heightened retail participation.

The moderation comes amid lacklustre equity market performance. India’s benchmark indices recorded their weakest showing in six years in FY26, with the Nifty 50 declining 5.1 per cent and the Sensex falling 7.1 per cent.

Broader markets showed mixed trends, with the Nifty Midcap 100 rising 1.9 per cent, while the Smallcap 100 declined nearly 6 per cent.

Heightened volatility further dampened investor appetite, as global uncertainties, including United States tariff actions, sustained foreign portfolio investor (FPI) outflows and geopolitical tensions triggered intermittent corrections.

The primary market, a key driver of account openings in FY25, also saw a shift. While FY26 was a record year in terms of fund mobilisation — with 112 IPOs raising ₹1.8 trillion — investor enthusiasm moderated.

Average listing gains dropped sharply to 8 per cent from 30 per cent a year earlier, while retail participation weakened, with average applications falling to 1.3 million from 2.13 million, according to Prime Database.

Market participants also point to early signs of saturation in top cities, where a large share of financially active investors have already entered the market.

At the same time, tighter regulatory scrutiny in derivatives and greater awareness of risks appear to have curbed speculative participation.

Trading activity reflected the cooling trend. Average daily turnover in the cash segment declined 6 per cent year-on-year to ₹1.13 trillion.

While derivatives turnover rose modestly, activity on the National Stock Exchange (NSE) showed signs of strain.

Looking ahead, demat account growth is expected to remain steady but more normalised in FY27.

Structural drivers such as financialisation of savings, digital adoption and expanding investor awareness are likely to support additions, though subdued returns and softer IPO traction may keep growth below FY25 highs.