Key concerns include pending regulatory consultations and the effects of a sustained market correction, which may lead to reduced trading volumes.
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Demat accounts inched up to 200 million in India; however, penetration in mutual funds (MFs) and stocks remains lower compared to the economy’s potential, the latest report by Motilal Oswal on capital markets revealed.
The report noted that the active clients in the F&O segment also declined to 3.1 million in March since June 2024 as the number of weekly expiries reduced to one per exchange and the lot sizes of benchmark indices increased.
However, the pending outcomes of consultation papers on entry-level gross limits on index options, demerger of clearing corporations, transfer of treasury income and expiry dates as Tuesday/ Thursday are also key concerns.
The domestic brokerage said a sustained market correction for exchanges and brokers is envisaged to lead to a volume decline.
Meanwhile, asset management companies (AMCs), wealth managers and RTAs are the least sensitive to equity market movements, as they earn on AUM.
Motilal analysts expect a gradual recovery in volume growth, with increased retail participation, to support ongoing growth trajectory of brokers and exchanges. In addition, improved equity mutual fund flows will foster a long-term investment perspective favourable for AMCs. Motilal’s top picks in the sector include Angel One, BSE, HDFC AMC, and Nuvama.
Published on May 21, 2025
