And even though it is still not clear what prompted SEBI to deviate from the mandatory demat trading diktat with respect to more scrips, market sources point out that the measure may not have any effect whatsoever on those who do not wish to enter the depository system.

``In terms of number of deliveries that are effected at NSE, a bulk of them are in sizes of 1,000 shares and less. These will continue to be exempted from delivery in demat shares. The remaining number of deliveries are by and large made by institutions who in any case have to deliver only demat shares irrespective of the size of the delivery. What is the change then that SEBI has sought to bring about?'' asked a marketsource.

In fact, proponents of the depository are viewing the SEBI measure as a step backward. ``Agreed that the step by itself does not harm the depository but since SEBI had made it clear that it would settle for nothing but mandatory demat trading, this diluted diktat is somewhat of a setback,'' said another market player, closely associated with the depository process.

Sources said that some of the members of the SEBI core group on depositories pointed out that the move, apart from not being able to be successfully monitored by stock exchanges, will not be viewed favourably by the market considering that the market was hoping for an expansion of the mandatory demat list.

Sources said that SEBI officials including chairman, DR Mehta were of the view that this measure needs to precede complete demat trading in scrips. There was no fresh reasons that were cited other than the ones that have already been there even before SEBI came out with the list of 10 securities where only demat trading would takeplace from January 4 onwards.

In fact, the depository has only grown since that announcement in terms of number of depository participants as well as number of investor accounts.

Further, market players have expressed surprise over the decision of SEBI to extend the list of mandatory demat trading securities by only two. ``It is the criterion for expanding the list which is surprising. These two companies, Wipro and VSNL have been added to the list because they so desired and requested the regulator. What is the message being sent out. If a company wants to be in the list it will be included but not otherwise,'' said a market participant.

The other critical aspect of the SEBI decision is that it will ensure that the market takes that much more time to move to a completely demat trading segment. By allowing shares to be delivered in physical and demat both, the segmentation of the market will continue and this means that all the benefits associated with having a pure demat segment would have towait.

This practically means that the market can forget about introduction of rolling settlements as these are not feasible till the entire settlement activity takes place only in demat form. ``Nothing would change. Those who did not want to come to the demat mode will continue to stay away. Those who want to come to the depository will come anyway. The only thing that will change is the perception that the regulator was inclined to go the whole hog in pushing for dematerialisation,'' said a highly placed market source.