There are still plenty of scrips which can be bought and sold in the physical form. It is only when you want to sell your existing holdings that the question of getting shares dematerialised arises.

Even here, you can postpone the opening of an account with a depository participant. Sebi has given small investors the leeway to deliver up to 500 shares in physical form. Incidentally, this is a modified rule (effective from May 3, 1999) of the original which prescribed a limit of Rs 25,000.

An interesting fallout of this rule is that you pay a price for delivering physical shares. The buyer gets a discount ranging from 10-15 per cent to the normal market price. The discount is determined bymarket forces and takes into account the risks of bad deliveries, transfer delays and attendant costs like auction of shares not delivered in time by the buyer.

For example, in Calcutta on Monday last the lowest price of Reliance was Rs 179 whereas in the odd lot segment the average market price was only Rs 174.58. Similarly, SBI would have fetched a maximum of Rs 238.55 in the physical form against the ruling market price of Rs 247.

Physical shares are now bought and sold through `odd lot' windows of the major stock exchanges like BSE, CSE and DSE. Only the NSE does not give investors the facility to sell physical shares because their system does not permit trades in odd lots, point out market sources.

Stock exchange authorities maintain that brokers are aware of the fact that violation of this rule can be detected easily when it concerns a particular client. But if a client has multiple broker relations, he can get away by selling higher quantities than the prescribed limit per scrip without beingnoticed by the surveillance department, they add.

The introduction of demat trading has done away with the concept of odd lot shares because there are always ready buyers and sellers which was not the case earlier. Odd lot trading was a separate market in the physical segment and trades were done at a discount determined mutually between the buyer and seller.

Alternatively, delivery of shares upto 500 even though in market lots (under the previous system) are now fetching a lower price. The discount is market determined and is voluntarily accepted by the seller as a price to be paid for avoiding dematerialisation of his holdings, point out sources.

It may sound a bit strange but the fact is there are no odd lots in demat segment and there are no market lots in physical form. As a result of market reforms, demat shares command a premium over physical shares.

As time goes by, the risks associated with physical shares would tend to increase and so would the discount for the simple reason that there wouldbe no takers for defective shares, sources explained. Unless you want to say quits to the secondary market, it pays to have a demat account.