Demat accounts jumped 39 per cent year-on-year (YoY) in November 2022, while mutual fund net inflows saw a “significant” dip in April-November 2022 compared to last year.
The number of demat accounts increased by 39 per cent year-on-year (YoY) in November 2022, indicating more investors are taking to stock market trading to grow their wealth, data from the market regulator, the Securities and Exchange Board of India (Sebi) has revealed.
There were 1061.7 lakh demat accounts at the end of November 2022, compared to 766.1 lakh in the same period of 2021. However, in FY2022 or at the end of March 2022, the number was 890.3 lakh.
However, the pace of growth in demat accounts has slowed in FY2023 compared to FY2022, possibly due to the increased market volatility amid various global headwinds.
On the other hand, mutual funds saw a significant reduction in net inflows during the April-November 2022 period compared to last year. However, in the same period, some growth equity - and solution-oriented schemes witnessed significantly higher inflows than the previous year.
Despite the dip, the mutual fund industry's assets under management (AUM ) rose 8.1 per cent YoY in November 2022, thanks to the market performance, the government's "Economic Survey 2022-23", which compiled various market data from Sebi and the stock exchanges , said.
Income or debt-oriented schemes and hybrid plans saw more outflows than inflows in the same period of the previous year. Outflows from liquid and hybrid plans were primarily affected by increasing interest rate cycles, liquidity requirements, and advance tax commitments by corporates.
Equity Cash Segment Sees Decline
In addition, the share of individual investors in the cash segment marginally declined in FY2023 (April-November 2022) compared to the same period in FY2022.
The equity cash segment turnover declined between April and November 2022 compared to last year's period. However, equity derivatives volumes rose considerably, “reflecting the drifting interests of individuals and proprietary traders away from the equity cash segment to the equity derivatives segment,” the report said. The turnover in the cash segment was Rs 98.2 lakh crore in FY23 (April-November) compared to Rs 124.3 lakh crore in FY222.
Commodity & Currency Derivatives
Currency and commodity derivatives volumes too increased, driven by the uncertainty faced across the world. Several global factors can be attributed to these developments. The US Federal Reserve’s monetary tightening and the Russia-Ukraine conflict, creating supply disruptions in the commodities market, especially energy, base metals, and food commodities, may have led to sharp corrections.
As a result, crude oil prices and base metals like nickel and aluminium saw a sudden jump. However, the prices of aluminium, copper, zinc, and nickel at MCX iCOMDEX Base Metal Index declined as of November 2022 compared to March 2022.
The turnover in commodity derivatives was Rs 92.6 lakh crore in FY23 compared to Rs 65.2 lakh crore in FY22. Likewise, in currency derivatives, the turnover was Rs 280.4 lakh crore in FY23 compared to Rs 152.7 lakh crore in FY22.
Foreign & Domestic Investors
Strong global economic headwinds, such as inflation, monetary tightening, and recessionary fears, exerted pressure on foreign institutional investors (FPIs) to sell their assets. However, they are still “sitting on gains from Indian stocks that could be realised to offset losses elsewhere”.
Due to the Indian economy’s robust macroeconomic fundamentals and the improvement in risk appetite, the FPI holdings increased despite the outflows. As a result, the report said their total assets increased by 3.4 per cent at the end of November 2022 compared to the same period a year ago.
FPIs’ saw an outflow of Rs 16,153 crore in total net investments, comprising both equity and debt segment, in FY23 compared to Rs 5,578 crore in FY22.
However, the domestic institutional investors (DIIs) counterbalanced FPI outflows, making the Indian equity market relatively less susceptible to large-scale corrections. The market continued to see net DII inflows and net investment by mutual funds in equities during FY23 (until November 2022).