MUMBAI, March 30: The National Securities Depository Ltd (NSDL) chief CB Bhave has suggested that compulsory demat trading for institutions should be extended to another 20-25 scrips.SEBI had, in October last year, made it mandatory for institutional investors (FIs, FIIs, banks and mutual funds) to trade only in demat mode with respect to eight securities: Reliance, SBI, Bank of India, IPCL, ICICI, IDBI, L&T and Tisco.
Bhave has already taken up the issue with SEBI. "Out of the total 100 crore shares owned by institutional investors in the eight securities shortlisted as of now, 63 crore have already been dematerialised. And since institutions do not always trade their entire portfolio, we have already reached a very high percentage of dematerialisation in these securities," said Bhave.
"The time is now ripe to come out with a second list," said Bhave. SEBI sources had earlier told The Financial Express that the regulator would look at expanding the list after the April 6 decision to allowdelivery of demat shares in the physical segment takes effect. According to Bhave, the registrars have already handled the "peak load" when institutions came in to dematerialise their holdings just days before the January 15 deadline.
"If they could have handled that, they can handle any amount of demat requests," said Bhave. The first list saw to it that the scrips were evenly distributed among the registrars or else they would not have been able to cope with the heavy demat demand, Bhave said.
"Another reason for coming out with the second list is that unfortunately for the market, but fortunately for the depository, the primary market is not doing well and, hence, registrars are less burdened and can take on a high demand for dematerialisation," said Bhave.
Another important reason for broadbasing the existing list is to ensure that those foreign institutional investors (FIIs) who have hitherto not invested in the country for want of proper settlement infrastructure, will start investing, courtesythe depository. "These investors will not invest in eight stocks alone. They would look at a plethora of securities. And while nothing stops them from trading in the non-compulsory trading securities, the liquidity in the compulsory trading stocks would obviously be much higher and these would therefore be more attractive for trading," said Bhave.
According to Bhave, the average demat trading volumes per day would go up to about Rs 30-40 crore as against Rs 10-15 crore now post-April 6, when demat shares would be allowed to be delivered in the physical segment. He said that the depository is quite close to having at least two depository participant outlets in the top 50 cities in India. "There is a real positive response from the small centres. We must not forget that the depository is going to open up the capital markets bringing in more investors. We expect the total traded volumes in the Indian market to rise four- to five-fold when most trades shift to the demat mode," said Bhave.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
