Mumbai: Indian brokerages are grappling with a paradox. More people are opening new demat accounts to trade in the stock market, but a smaller share of them are trading regularly.
Active clients made up 26.32% of India’s 15.2 crore demat accounts in FY2024. That share dropped to 19.1% in the three months through June of fiscal 2027, even though the total number of demat accounts had jumped to 23.2 crore, a Mint analysis showed.
The analysis was based on data from the National Stock Exchange (NSE) and the Securities and Exchange Board of India (Sebi).
In fiscal 2026, the active client ratio relative to demat accounts fell the most, by 5.22 percentage points, to 20.1%, when compared to the preceding year. The figure has continued to decline in the first three months of fiscal 2027.
Key Takeaways
- Active demat client share fell to 19.61% despite a record 23.2 crore accounts.
- FY26 saw the steepest drop, active-client share falling 5.22 percentage points that year.
- Sebi’s derivatives curbs have halved the active options traders from 50 lakh to 30 lakh.
- February’s US-Israel strikes on Iran cut Nifty and Sensex turnover by roughly 30%.
- Brokerages call it normalization, expecting a rebound but not a return to derivatives highs.
An active client is a registered investor or trader who has executed at least one transaction in the past 12 months.
Millions of people continue to open demat accounts due to easy digital onboarding, growing financial awareness and confidence in India’s long-term growth story. To be sure, an investor can have multiple demat account depending on the number of brokers they are dealing with. But many of these investors are not becoming regular market participants.
Brokerages said the slowdown is being driven by weaker market returns, tighter regulations on derivatives trading and geopolitical tensions that have made retail investors more cautious.
“A large share of new accounts opened during the post-pandemic boom were used for short-term goals such as IPO applications or quick gains from trading,” said Dhiraj Relli, managing director and chief executive officer (CEO) at HDFC Securities.
“However, in the absence of any large IPOs, listing losses in IPOs, heavy retail losses in derivatives trading, along with uncertainty around valuations and global tensions, have also encouraged a wait-and-watch approach, leading many traders to step back from the market,” said Relli.
From boom to pullback
The cooling-off follows a period of optimism when retail participation surged between 2020 and late 2024, fuelled by a bull market, easy access through discount brokers and booming interest in equity derivatives. However, active clients have increased 10.5% since FY24 to 4.42 crore, according to the National Stock Exchange, but new account openings are growing much faster than active participation.
“From 2020 to September 2024, the stock market was moving in one direction. Investors kept trading in the markets. But when stocks act choppy, many short-term investors/traders are unable to get their expected returns,” said Roop Bhootra, CEO – investment services at Anand Rathi Shares and Stock Brokers.
“They stop trading or don’t find the opportunity to come out of their existing investment and wait for the market to rally again. In the past year, investors who were active have gradually become inactive,” said Bhootra.
The sharpest decline in active participation has come from the derivatives market.
Since 2023, Sebi has repeatedly flagged the growing losses of retail traders in equity derivatives. The market regulator’s latest study, published in July 2025, showed that 8.7 million of the 9.6 million individual traders in the segment lost a combined ₹1.05 trillion in FY25.
To curb excessive speculation, Sebi introduced a series of measures from November 2024. These included tripling the minimum contract size for index derivatives, allowing only one weekly options expiry per exchange, changing the way open interest is calculated and imposing a gross daily exposure limit of ₹10,000 crore for equity derivatives participants.
“The impact has been most visible in the derivatives segment. The regulatory measures, including the increase in index derivative lot sizes and other risk management initiatives, have structurally reduced speculative trading activity. Industry monthly active options traders have declined from roughly 50 lakh to around 30 lakh,” said Shripal Shah, MD at Kotak Securities.
West Asia war adds to the caution
Another factor contributing to subdued trading is the escalation of the US-Iran war, which has effectively corrected the Indian stock markets.
On 28 February 2026, the US and Israel launched coordinated military strikes on Iran, triggering a sharp escalation in geopolitical tensions across West Asia. The conflict heightened uncertainty over global energy supplies, raised concerns about disruptions to shipping through the Strait of Hormuz, and led to increased volatility in financial markets as investors reassessed geopolitical and economic risks.
Since the conflict began, cash market turnover has fallen sharply, indicating weaker investor participation. The turnover of Nifty 50 has fallen 30.22% to ₹28,825.71 crore since the beginning of the war. BSE Sensex turnover fell 31.68% to ₹1,549.49 crore in the same period.
Brokerages are now closely monitoring the decline in active clients, while some project a rebound in retail investor participation. The decline in active investor participation has not yet impacted their financial performance.
“It is a trend brokerages are watching closely, but it appears to be a normalization after the extraordinary retail participation seen over the last few years. The industry’s long-term growth story remains intact. We expect a gradual improvement in active clients if market sentiment strengthens and volatility moderates,” said Kamlesh Shroff, managing director at The Omniscient Securities Ltd and the president of the Association of NSE Members of India.
Brokerages expect active client numbers to improve if market sentiment strengthens, corporate earnings remain healthy and geopolitical tensions ease. But they do not expect the derivatives market to return to the high levels of activity seen before Sebi tightened the rules.
