Why fewer new demat accounts don’t mean retail investors are losing interest in markets, expert explains

A slowdown in new demat accounts openings may appear like a sign that retail investors are losing interest in the stock market, but ClearTax CEO Archit Gupta argues the opposite. According to him, the moderation marks a shift away from speculative trading and towards long-term investing, with rising SIP inflows and capital gains tax filings pointing to a healthier investment ecosystem.

For the past five years, demat account growth remained close to 30% or higher but last year, it slipped below 20% for the first time, Gupta said in a X (formerly Twitter) post, citing data from NSDL and CDSL. Though, most people would assume that retail investors have lost interest, he believes that reading is wrong.

“Most of the market activity in the last few years was noise. A lot of accounts but very little real investing. People chased tips and quick profits. That crowd leaving is not a loss. It is the market clearing out its speculators,” he said.

What numbers say about India’s retail participation

In five years, mutual fund assets have grown from ₹33.67 lakh crore to ₹82.22 lakh crore, while SIP contributions have continued to scale new highs. Even during bouts of market volatility, retail investors stayed the course. Monthly SIP inflows hit a record ₹32,086 crore in March 2026, according to the RBI’s Financial Stability Report (FSR).

In five years, mutual fund assets have grown from ₹33.67 lakh crore to ₹82.22 lakh crore, while SIP contributions have continued to scale new highs every month. Even during bouts of market volatility, retail investors kept on putting money in different assets.

Also Read | India’s demat boom masks a shrinking base of active traders

Mutual fund SIP inflows rose ₹ ₹827 crore or 3% month-on-month to ₹31,781 crore in June, from ₹30,954 crore in May, registering a three-month high. On a year-on-year basis, monthly contributions increased by ₹4,512 crore, or 17%, from ₹27,269 crore in June last year. . The number of contributing SIP accounts stood at in 9.78 crore month.

“This is not a country losing interest in its markets. It is a country moving its savings into them. For generations we trusted gold, property and fixed deposits. That habit is finally evolving,” Gupta said, reiterating that retail participation in India’s capital markets has remained resilient.

ITR filings reveal India’s retail investing boom

The strongest evidence of India’s retail investing surge isn’t just visible in stock market data, it’s showing up in tax returns.

A demat account can remain dormant but an ITR-2 cannot. It is filed only when taxpayers have capital gains or other eligible income to support and those filings are rising sharply, according to Cleartax internal data.

The data states that ITR-2 and ITR-3 forms have grown from accounting for about one-sixth of all filings to nearly half in just three years. This means the money did not just enter the market, it stayed, grew and is now being taxed, according to the expert.

Also Read | Is India’s retail investor story losing its stickiness?

“So a slow year for new accounts does not worry me. The market is filtering out its speculators and retaining the serious, long-term investors. That is the shift that will define the next decade,” Gupta said.

Salaried employees with long-term capital gains up to ₹1.25 lakh can now file ITR-1 if their total income is up to ₹50 lakh and they do not have business income. However, if capital gains exceed ₹1.25 lakh, taxpayers must file ITR-2, unless they actually earn business or professional income.