MUMBAI, Mar 9: A clutch of leading UK and Europe-based foreign institutional investors (FIIs) have said that they would dematerialise up to 100 per cent of their holdings if there was no dilution in the recent Sebi diktat allowing delivery of demat shares in the physical segment from April 6 onwards.This view was conveyed to senior NSDL officials by the top brass of about 20 FIIs during the first leg of the roadshows organised in UK and Europe by the Indian broking arm of Jardine Fleming.
According to NSDL sources, there is a considerable amount of interest in the Indian markets among foreign investors and the idea behind the recent meetings was to clarify doubts about the problems of liquidity in the demat segment.
It is learnt that `very senior' officials of the FIIs in question had separate meetings with the NSDL officials to apprise themselves of the progress made by the depository.
``Fund managers were of the opinion that once delivery of demat shares is allowed in the demat segment it would bemore logical to dematerialise the entire holdings as there would be more liquidity than in the physical segment. If one keeps the shares in the physical segment then only this segment would be available for delivery unlike the choice of both the segments if shares are in demat form'', said a source.
``Their doubts about the lack of liquidity in the demat segment and the seriousness with which the April 6 deadline is being pursued have been clarified'', said a source.
Fund managers were of the opinion that the premium on GDR issues made by Indian companies would also decline once the depository becomes more popular. This is because the premium attached to cleaner settlement mechanism would no longer be available given the improved settlement in the underlying market due to the depository.
In the absence of this premium, FIIs may be more keen to invest in the domestic market as this would be a direct way of taking an exposure in the Indian market rather than doing so through the GDR route. Interestingly,some of these FIIs have not invested in India despite being registered with Sebi for want of efficient settlement mechanism.
The second leg of Jardine Fleming's roadshows for south-east Asia will be kicked-off this week.
