44% of Demat Account Holders Missing from the Secondary Market: The Paradox of Nepal’s Stock Exchange

Despite the number of Demat accounts crossing the 8 million mark in Nepal, a stark disparity exists in actual stock market participation. Recent data from CDS and Clearing Limited (CDSC) and the Nepal Stock Exchange (NEPSE) reveals that nearly 44% of Demat account holders remain entirely outside the secondary market's direct trading ecosystem.

The Trading Gap in Numbers:

• Total Demat Accounts: 8,072,877

• Total TMS (Trading) Accounts: 4,500,786 (Only 55.74% of Demat holders have trading access)

• Active Online Traders: 3,200,431

• Offline Traders: ~1.3 million investors still rely on traditional offline methods, such as visiting broker offices or placing orders via phone calls.

The primary driver behind this massive discrepancy is the overwhelming public fixation on Initial Public Offerings (IPOs). Rather than being viewed as long-term investments, IPOs are widely treated as a guaranteed lottery system. Families frequently open Demat accounts for every household member to secure the minimum 10-unit allotments. However, once shares are allotted, a severe lack of financial literacy and technological hesitancy prevents these retail investors from navigating the secondary market to buy or sell shares independently.

Furthermore, the sheer volume of Demat accounts paints an inflated picture of true financial inclusion. Analysts indicate that over 500,000 of these are duplicate accounts, while a significant portion remains inactive or unrenewed for years.

For the sustainable development of the capital market, experts stress that regulatory bodies must shift their focus from celebrating account numbers to enhancing financial literacy. Transitioning this massive crowd of primary market participants into informed, active secondary market investors remains the most pressing challenge for Nepal's financial sector.