This, according to the Sharjah-based NRI Investors Forum could lead to `billions of rupees' flowing into the Indian equity markets from NRIs. Sebi is meeting stock exchange chiefs on August 19 to reach a consensus on whether demat trading can be made mandatory with regard to some scrips. In a memorandum to Sebi chairman, DR Mehta, the forum has said that NRI investment is needed most now at a time when FIIs are pulling out of the country. NRI investment in the secondary markets, according to the forum is largely dependent on the success of the depository as these investors have burnt their fingers in dealing with paper and are not willing to come back to the market in a physical environment.

However, the absence of liquidity in the demat segment is preventing these investors from making fresh purchases in thedemat form and this is restricting the flow of investments.

"NRI secondary market investors were dissatisfied with bad deliveries, delay in transfer, delay in despatch of transferred certificates and loss of certificates in transit. We felt the introduction depository system in India will be the end of our plight. We extended full support for the success of the depository awareness programme organised by the National Securities Depository Ltd (NSDL) in UAE in November, 1997. After the programme more than 100 investors had opened NSDL accounts to buy shares in demat form", states the letter written by KV Shamsudheen chairman of the forum. "All of them placed orders to purchase shares from the demat segment. Brokers could not execute their orders because there were no sellers in this segment. Only half a dozen companies are trading in the demat segment.

This situation dissatisfied all of us who campaigned for the NSDL operations in India. In this depressed market, hundreds of investors want to invest inIndian secondary market but they are reluctant to enter because of their bitter experiences in physical form of transaction and non-availability of shares in the demat form. We request you to take urgent action for enhancing liquidity of demat segment in Indian stock exchanges", the letter adds.

The forum has suggested that inflow from NRIs could be enhanced by making demat trading mandatory and if this is not found workable then the demat segment should also have a weekly segment like the physical segment, so that there is no disparity between the two segments.

"If one of this suggestion is implemented billions of rupees will pour from NRIs to the Indian secondary market", the letter adds.