India is home to 140 crore people, yet only 17 crore of them have a demat account. That means less than 13% of the population participates in the stock market. With one of the world’s fastest-growing economies and a booming stock market, why is investing still not mainstream for most Indians? What’s holding back the majority from opening demat accounts?
In this article, we will examine the reasons behind this disparity and explore its implications for India’s economy.
1. Lack of Financial Literacy
One of the biggest hurdles is financial literacy—or rather, the lack of it. Many Indians simply don’t understand how online investing in the market works or how it can help them grow their wealth over time. For decades, investing in stocks has been viewed with skepticism, often seen as risky or akin to gambling.
Without proper education about how markets function and how risks can be managed, people hesitate to take the plunge.
2. Cultural Preferences
India has a deeply ingrained culture of saving, but traditionally, these savings go into fixed deposits, gold, or real estate rather than stocks. Gold is considered a safe and tangible asset that holds emotional value for many households, while real estate is seen as a reliable long-term investment.
Stocks, on the other hand, are perceived as volatile and unpredictable—a mindset that discourages many from entering equity markets.
3. Fear of Losing Money
We have often heard that “The stock market is gambling”. Stories of people losing their savings in market crashes spread faster than success stories. No one talks about the investors who patiently held on and grew their wealth. Fear often wins over opportunity, keeping many potential investors on the sidelines
4. Economic Inequality
The reality is that a significant portion of India’s population struggles with poverty or low incomes. For these individuals, investing in stocks is not even on their radar because they are focused on meeting immediate financial needs like food, shelter, and education. Equity investments require surplus funds that many simply don’t have.
5. Complexity of Regulations
The regulatory hurdles in investing can be quite intimidating, even for enthusiastic newcomers. The process of opening a demat account, with its extensive document requirements, often adds to this feeling of being overwhelmed.
Recent Trends: Signs of Progress
Despite these challenges, there’s been remarkable growth in demat account over the past few years. Between 2020 and 2024 alone, millions of new accounts were opened—a trend driven by several factors:
- Digital Revolution: The pandemic accelerated India’s digital transformation across sectors, including finance. Today, opening a demat account online is quick and easy, which has encouraged more people to start investing.
- Market Boom: The Indian stock market has performed well in recent years, attracting new investors who see equities as an opportunity to earn better returns compared to traditional savings options like fixed deposits.
- Women Investors on the Rise: Interestingly, more women are entering the stock market than ever before—accounting for nearly 25% of new investors. This shift reflects changing societal attitudes toward women managing finances independently.
How Can We Close the Gap?
- Make Financial Education a Priority: Schools and colleges need to teach students about investing from an early age.
- Simplified Processes: Regulatory bodies should make it easier for first-time investors to open demat accounts without excessive paperwork.
- Targeted Outreach: Financial institutions should focus on rural areas and low-income groups with tailored products and awareness campaigns.
Conclusion
The gap between India’s population size and its number of demat accounts highlights deep-rooted challenges like financial illiteracy and cultural preferences, but also presents growth opportunities. With targeted efforts to educate people and make investing accessible across all demographics, India can unlock its true potential as an investment-savvy nation.
As more Indians embrace equity markets, they’ll not only build personal wealth but also contribute to stronger economic growth—a win-win scenario for everyone involved.
