The option of working from home during COVID attracted a massive influx of new investors into the stock market and the rise continues, even as stock indices have begun to wobble badly in the past two monhts. As of 31 January 2022, Central Depository Services (India) Ltd (CDSL) has 58.49mn (million) (58,497,541) investor accounts, while National Securities Depository Ltd (NSDL) has 25.48mn (25,483,687) client accounts active. In short, the depositories have 83.98mn (83,981,228) investor accounts. Out of CDSL’s 57.49mn demat accounts, 58.36mn are individual account-holders. The same figure for NSDL comes to 24.78mn out of 25.48mn. However, CDSL and NSDL do not provide information about unique investors.
During January 2022, as many as 3.39mn (3,388,979) investors opened accounts with the CDSL and NSDL. The total number of new accounts opened from April 2021 until January has exceeded 28.85mn (28,853,792).
According to information shared by market regulator Securities and Exchange Board of India (SEBI), during January, NSDL had added 500,000 demat accounts while the CDSL added 2.9mn demat accounts. Cumulatively, both the depositories have added 28.9mn new accounts in this fiscal year so far (April 2021-January 2022), with CDSL itself accounting for 25.1mn new demat accounts, the market regulator says.
Data from the depositories show that during the first month of 2022, CDSL has registered 2.93mn (2,930,544) new accounts, while for NSDL, it is 458,435, taking the number of new accounts opened to 3.39mn.
As reported by Moneylife, India’s investor population has nearly doubled since the lock-down forced by the COVID pandemic in March 2020. This means that over half the investors today—almost 20mn of them—are first-time investors in the stock market. They are attracted by a ferocious bull run that has allowed many first-timers to make a lot of money.
The level of ignorance among investors about the primary character of equity investment and its inherent risks is such that bankrupt companies facing insolvency proceedings have become a hotbed for fraud and manipulation.
There are over 5,000 companies listed on the Bombay Stock Exchange (BSE) and about 1,600 on the NSE. Of these, about 3,000 are traded regularly and, at any point of time, a few thousand of them are nearly defunct companies, ready for resolution, are under the radar of fraudsters for price manipulation.
Since the price is usually a few paise
, it is easy to lure the gullible with the promise of a massive percentage return (a 1,000% return is relatively routine in such manipulation) on minimal investments. It is also easy to manipulate prices in the early stages to attract naïve newbie investors. (Read: Many Ways of Being Fooled in a Bull Market
After the initial public offerings (IPOs) mania of the mid-1990s, investors vanished from the Indian stock market in millions. The primary market for new issues was dead for years and investors even shunned mutual funds for a long time. After stagnating at 20mn investors for decades, India’s investor population has exploded by millions since the pandemic.
Unlike the IPO mania of the past, when people fell prey to a dubious nexus of bankers, investment bankers, brokers, underwriters, mutual funds and the media (which earned big money on advertisements), investors have multiple sources of information today, especially on social media. Almost every sane voice has been warning investors to guard against the growing madness. Are investors listening? One thing is sure this time. Nobody can claim that she wasn’t warned. The best way forward is to understand the past. History has a nasty habit of repeating itself. (Read: IPO Boom: From the Roaring ’90s to Swinging ’20s, Will Retail Investors Emerge Unscathed?