The scheme, open for initial subscription for over a month, closed on April 23, 1999. Till Friday, it had been able to garner Rs 15 crore with most of the subscriptions coming in from retail investors.

The paltry collections were attributed by the GIC AMC chief executive officer AR Prabhu to the volatile political situation and the bad market conditions which happened to pop-up after the launch of the scheme.

According to Prabhu: "When we had launched the scheme, around a month back, we had not expected such a villainous and unfavourable market condition."

A senior official of the AMC adds: "When the markets fall so dramatically and swing 100 points, up and down every day, the retailsentiment is the worst affected. This leads to the retail investor refraining from participating in the markets, especially, the equity markets which are anyway perceived to have a huge risk element. This has affected our scheme adversely".

Another reason cited by a mutual fund analyst for the insignificant mop-up by the scheme: "When an investor gives his shares for demat to the GIC D'Mat scheme he forgoes all rights to the shares as the ownership of the shares is transferred to the asset management company."

The benefit of future dividends, bonus or rights will all accrue to the AMC under such a scheme and not to the investsor. He will get returns on the prevalent net asset value (NAV) and not the benefits attached to the shares. "This might have probably played a very significant role in influencing investor to get into the scheme," he adds.

According to Prabhu the D'Mat scheme will re-open anywhere between the next one to six months. "Now we will re-open the scheme when we are sure of a good andconducive environment for the scheme", said Prabhu. The AMC had launched the scheme based on the fact that a large number of investors would not be keen to dematerialise small lots of their holdings by undertaking the process of opening an account and that there might be several others who may not be able to avail of the depository services owing to lack of spread of the depository network.

The scheme works in the following manner: Initially the GIC D'Mat will accept physical shares of 70 companies, which the AMC has already identified. This list of companies would constantly be upgraded with additions and deletions of companies from the list. An owner of physical shares, which are part of the 70 companies recognised by the scheme, would submit these shares to the GIC demat scheme and the mutual fund will in turn issue equivalent units at face value of Rs 10 to the investors. The scheme will be NAV driven and the repurchase would at the NAV.