1. What Are Depositories?
Depositories like NSDL (National Securities Depository Limited) and CDSL (Central Depository Services Limited) are institutions that hold securities (like shares, debentures, and bonds) in an electronic format (demat). They facilitate:
- Safe storage of securities
- Efficient clearing and settlement of trades
- Electronic transfer of ownership
- Corporate actions processing (dividends, splits, rights issues)
They form the backbone of India’s post-trade market infrastructure, working behind the scenes every time an investor settles a delivery-based trade.
2. Value Chain: From Trading to Settlement
Here’s how depositories fit into the broader value chain:
- The investor opens a Demat account via a Depository Participant (DP) (e.g., Zerodha, HDFC Securities).
- Places order through a broker.
- Order routed to exchange (NSE/BSE).
- Once matched, clearing corporations (like NSCCL or ICCL) step in.
- On T+1, shares are debited from the seller’s Demat and credited to the buyer’s Demat via NSDL/CDSL.
Depositories ensure this transfer is:
- Secure
- Irreversible
- Time-bound
3. Who Partners with NSDL/CDSL?
- Depository Participants (DPs), such as brokers or banks (e.g., Zerodha, Upstox, HDFC Securities), partner with NSDL or CDSL.
- Companies (issuers) must also register with one or both depositories to enable the demat of their shares.
Example: A listed company like TCS may be registered with both NSDL and CDSL, but your broker might let you hold it via only one.
4. What Drives Depository Revenues?
- Annual maintenance charges from DPs
- Transaction charges for settlements
- IPO/new issue handling
- E-services (e-voting, KYC, pledge mgmt)
- New investor additions
More delivery-based trades, new listings, and Demat accounts = more revenue.
5. CDSL vs NSDL – Financials, Market Share
| Metric | CDSL | NSDL |
|---|---|---|
| Basic | ||
| Incorporated | 1999 | 1996 |
| Ownership | Public (Listed) | Unlisted (Promoted by NSE) |
| DPs | ~580+ | ~275+ |
| Demat Accounts | ~12.7 crore | ~3.3 crore |
| Companies Serviced | ~22,000 | ~7,000 |
| Market Share in Retail | ~70–75% | ~25–30% |
| Financials | ||
| Revenue | ₹1,099 crore | ₹1,365 crore |
| PAT | ₹685 crore | |
| ROE | 25%+ | |
| Market Cap | ~₹21,000+ crore | Not listed; backed by NSE, IDBI, UTI, HDFC, SBI etc. |
| Growth Rate | ||
| 5 year Revenue CAGR | ~24.5% | ~10% |
| Projected CAGR (FY25-30) | ~12-20% | 10-12% |
| Revenue Breakdown | ||
| Annual Issuer Charges | ~40% | ~30% |
| Transaction & Settlement Charges | ~35% | ~50% |
| eKYC, IPO, Corporate Action Fees, Archival and other Digital Services | ~25% | ~20% |
6. How to Grow Revenues Further
For CDSL:
- More retail accounts (Zerodha/Upstox/Angel One onboard more users)
- SME listings & IPO boom
- Dematerialization of insurance policies, sovereign gold bonds
- e-services for non-equity instruments
For NSDL:
- Greater institutional trades
- New mandates (e.g., demat insurance, private company shares)
- Cross-selling archival & e-vault services
- Monetizing corporate action services
7. Daily Delivery Volume – Retail vs Institutional Split
| NSE | BSE | Combined | |
|---|---|---|---|
| Avg daily cash turnover | ~₹95,000 crore | ~₹10,000 crore | ~₹1,05,000 crore |
| Delivery ratio | ~60% → ~₹57,000 crore/day | 60% → –6,000 crore | ~60% → ~₹63,000 crore |
| Retail share | ~45% → ~₹25,700 crore | ~45% → ~2,500 crore | ~45% → ~₹28,000 crore |
| Institutional share | ~55% → ~₹31,300 crore | ~55% → ~3,000 crore | ~55% → ~₹35,000 crore |
8. U.S. Market Comparison
1. U.S. Equity Settlement – Always Delivery-Based
In the U.S. cash equity markets (like NYSE), every share trade results in settlement into an investor’s brokerage account. Unlike F&O in India, there is no “intraday-only” exception—all trading is inherently delivery-based.
2. Retail vs. Institutional Volume Share – Historical Trend
Several studies show a dramatic rise in retail investors’ share of daily trading volume over the past decade:
- In 2011, retail investors accounted for just ~10% of total equity trading volume
- By 2021, their share nearly doubled to ~22–25%
- In 2024, retail maintained a 20–30% share of overall volume, particularly active in small-cap and meme‑stock sectors
Meanwhile, institutional and market-maker/invisible flow (including dark pools and high-frequency trading) comprise the remaining 70–80%.
3. Growth Rate Over the Last Decade
From 2011 to 2021, the retail share grew from ~10% → ~22% →, implying a compound increase of ~8% per year.
The absolute growth from ~10% to ~25% is a 150% increase in retail participation.
Retail’s share plateaued around 20–25%, even during periods like 2020–2024.
4. Institutional Dominance Enduring
Despite retail gains, institutions continue to drive ~75% of NYSE trading volume, mainly via:
- Asset managers, pension funds, and hedge funds
- High‑frequency trading firms (50–60% of volume)
- Dark pool and internalized volume (~50% recent share)
5. Summary Overview
| Investor Type | 2011 Volume Share | 2021 Volume Share | Estimated 2024 Share |
|---|---|---|---|
| Retail | ~10% | ~22% | ~20–25% |
| Institutional + HFT | ~90% | ~78% | ~75–80% |
6. Implications
- Delivery Settlement: All NYSE trades settle into investor accounts—retail and institutional.
- Retail Rise: From ~10% to ~25% volume share in a decade shows significant retail influence.
- Institutions Still Drive ¾ of Volume: Retail participation alone doesn’t dominate.
9. Projected Growth Over the Next Decade
- Equity market cap projected to grow from $5T → $10T by 2030 (14% CAGR)
- Equity turnover is estimated to grow at 6–7% CAGR
- Delivery-based trade volume likely to double from ~₹63,000 cr/day → ~₹112,000+ cr/day
CDSL:
- Revenue CAGR (projected): 12–20%
- Target revenue by FY35: ~₹3,500–9,000 cr
NSDL:
- Projected growth: 10–12% CAGR
- Target revenue by FY35: ~₹3,000–4,600 cr
10. Strategic Insights
- Retail investors trade less frequently, but dominate in terms of number of accounts.
- Institutional investors, while fewer in number, account for a higher value share.
- Delivery trades are central to revenue for both CDSL and NSDL, unlike intraday/F&O which settle at broker level.
- F&O trades do not require depository settlement, hence are not revenue generators for CDSL/NSDL.
- Growth will be driven by:
- Equity asset expansion
- Financialization of Indian households
- Regulatory mandates (e.g., demat for insurance, digital vaults)
- IPO boom and SME participation
11. Final Takeaway
India’s depository ecosystem is going to benefit from rising equity ownership, increasing delivery-based trading, and regulatory mandates toward digitization. However, as seen in mature markets like the U.S., institutional volume remains dominant, even with a rising retail footprint. A similar path may unfold in India over the next decade.
- If someone believes retail delivery participation will grow faster, CDSL (with a strong retail foothold) may offer higher upside.
- If institutional volume continues to drive India’s settlement ecosystem, NSDL may emerge stronger.
Depository services may not make headlines daily, but they are the quiet enablers of India’s financial revolution.