After two years of strong expansion, the pace of new demat account additions slowed in FY26, signalling a shift in retail investor behaviour as volatile markets and weaker returns tempered their enthusiasm.
Net demat account additions fell to about 32 million in FY26 from a record 41 million added in FY25, according to data collated from the Centre for Monitoring Indian Economy. The total number of demat accounts crossed 225 million.
The 22% year-on-year decline in additions of demat accounts—dematerialized or paperless accounts mandated for trading in securities—suggests that the surge in retail participation during the recent bull run is beginning to lose momentum amid a more uncertain global and market environment.
The longer-term trend shows how growth is now normalizing after a sharp post-pandemic surge. New accounts had jumped from 14 million in FY21 to 35 million in FY22, marking a 142% rise, the data showed.
This was followed by a moderation to 25 million in FY23. The momentum picked up again in FY24 with 37 million new accounts and peaked in FY25, before easing in FY26 as market conditions turned more volatile.
“Markets are currently in a consolidation phase. Whenever markets are in a downtrend and sentiment weakens, retail activity tends to decline. This is a cyclical pattern,” said Kranthi Bathini, director of equity strategy at WealthMills Securities. “Seasonal investors typically enter when markets are rising, so periods of negative sentiment lead to slower account additions.”
The moderation is also visible in monthly data. Net additions fell to 2.15 million in March from 2.81 million in February and 3.62 million in January, marking the lowest level of account additions since May 2025. Month-on-month growth slipped below 1% (to 0.97%), the slowest pace since January 2020.
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“The slowdown appears largely cyclical rather than structural,” said Harshal Dasani, business head at INVasset PMS. “Elevated volatility, muted secondary market returns and disappointing IPO outcomes have reduced the quick-gain appeal that drove retail participation in recent years.”
He said the broader structural drivers remain intact.
“Digital access, lower costs and rising awareness continue to support long-term growth. What has changed is behaviour—investors are becoming more selective and disciplined.”
The moderation in demat additions comes against the backdrop of a challenging year for equities. The benchmark indices posted their weakest performance in six years in FY26, with the Nifty 50 declining 5.1% and the Sensex falling 7.1%.
The broader markets had a mixed trend. The Nifty Midcap 150 managed a modest gain of 1.6%, supported by selective buying, while the Smallcap 250 declined almost 5.4%, reflecting pressure in riskier segments.
Global factors contributed to the volatility. US tariff actions, geopolitical tensions in West Asia and persistent foreign portfolio investor outflows at about ₹1.8 trillion during the year kept the markets on edge and triggered intermittent corrections.
The slowdown in demat additions mirrors a cooling in primary market activity, which had been a key driver of retail participation in recent years.
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India’s market for initial public offerings had expanded rapidly, with fundraising increasing from ₹20,350 crore in FY20 to ₹1.11 trillion in FY22 and peaking in the subsequent years. However, the momentum has softened.
A Mint analysis shows that the share of mainboard IPOs receiving strong retail subscription—defined as more than 10 times demand for shares offered—declined to 39.4% in FY26 from 58.2% in FY25 and 52.6% in FY24. This reflects a clear shift towards more selective participation.
“The moderation looks more like a pause than a reversal,” Dasani said. “However, FY27 may not see a sharp rebound unless market stability improves and IPO outcomes strengthen. Growth is likely to continue at a measured pace, driven more by informed participation than speculative enthusiasm.”
Bathini of WealthMills echoed a similar view on the outlook.
“Once market sentiment improves, the pace of new investor additions will pick up again. India still has significant headroom for growth as equity penetration remains low,” he said.
Mayur Bhalerao is a markets reporter at Mint with around 12 years of experience across finance and media. His coverage focuses on Indian equities, IPOs and broader market trends, tracking developments across large-cap, mid-cap and small-cap stocks as well as shifts in investor behaviour among retail investors, mutual funds and foreign portfolio investors.<br><br>Mayur’s reporting emphasises data-driven analysis of market movements, valuations and sectoral trends. He uses shareholding disclosures, financial filings and market data to explain developments on Dalal Street and examine how global events and domestic policy changes—including geopolitical tensions, crude oil prices and regulatory decisions—shape Indian equities and investor sentiment.<br><br>He regularly uses financial databases such as the Bloomberg terminal and Capitaline to produce data-intensive stories, analysing company disclosures, ownership patterns and sectoral trends across both Indian and global markets. He also supports colleagues in the newsroom by providing database-driven insights and market data analysis that help strengthen broader market coverage.<br><br>Before joining Mint, Mayur worked at Informist Media Pvt Ltd., a leading financial newswire, where he developed his expertise in financial journalism in a specialised markets newsroom.