How CDSL mastered the formula

If you look at the growth in CDSL demat accounts, then the 6 crore figure does look impressive. In getting to 6 crore demat accounts, the last 1 crore demat accounts were added in last 3 months with the last 2 crore accounts added in the just 6 months. The total number of CDSL demat accounts were at about 2 crore in March-20. In 2 years, the demat account numbers at CDSL have grown by an impressive 200%. CDSL added twice the demat accounts in last 2 years compared to 21 years since inception. In a way, the CDSL demat growth has been predicated on two key factors. The first is that CDSL became a Depository of choice for many of the new low-cost brokers as they preferred the low cost structure and the flexibility of CDSL. It also meant that a host of millennials and young investors gravitated towards CDSL as the first choice. The other key reason was the target market. CDSL has been aggressive in targeting fresh demat account openings in Tier-2 and Tier-3 cities as well as smaller towns and villages. These locations have been the big contributors to the CDSL story. 

Beware of impetuous investing

Many of the millennial crowd and the non-metro crowd have come into the equity field only because other avenues of investment are hardly generating enough to cover inflation. The entire scenario could change if rates move up. Many of these investors are first time investors and they tend to be more impetuous. They believe that with all their discipline, they won’t make losses. However, the best of market veterans have learnt the hard way that it does not take too long for the markets to start working against you. Normally, it is not the bear markets but the prolonged bouts of inaction and quiescence that scares investors. That is yet to come. 

Beware the inflation risk

Nothing impacts investment returns as much as inflation. We are in a phase wherein inflation has stayed high and also promises to stay at elevated levels for a long time. That is normally the most difficult period for retail investors as most family budgets will become a lot tighter. You can just imagine the spill over impact if crude oils is at $118/bbl. In periods of high inflation, people will find their income levels stagnating but their purchasing power declining. That is the kind of phase which not only strains the finances but also makes them very skeptical about any form of savings and investment products. These are two scenarios that CDSL must be wary of!