Market magic casts equity spell on small towns

Tier-III cities see an increase of over 50% in demat accounts.

The unprecedented three-year-long bull run on the stock market has triggered a spurt in demat accounts in tier-III cities like Guntur in Andhra Pradesh, Dhanbad in Bihar, Kangra in Himachal Pradesh and Jabalpur in Madhya Pradesh.

This is the first clear indication that the equity cult has spread its roots deep into the country's heartland.

Latest data available with the National Securities Depository Ltd (NSDL) shows an increase of over 50 per cent in the number of demat accounts in these cities from February 2004 to January 2006, even as the number of demat accounts in the country has grown 45 per cent to 60,47,828 during the period.

"The list of places where the investor spread is growing is diverse and these places are in different states of the country. We have been noticing this trend and have started conducting investor awareness and education camps in smaller cities," said NSDL Executive Director Gagan Rai.

Led by the smaller towns and cities, new states are emerging as the fastest growing investor base. In the last two years, Himachal Pradesh has seen 150 per cent rise in the number of demat accounts and Assam about 100 per cent.

The number of demat accounts in Andhra Pradesh, Haryana and Karnataka grew 60-75 per cent, while it was 50-55 per cent in Uttar Pradesh, Kerala, Madhya Pradesh and Tamil Nadu.

According to Rai, a new phenomenon is the rising number of demat accounts in the north-eastern states. "The shift reflects the increasing investment awareness in the otherwise lesser participating cities. We expect that these numbers will increase tremendously every year from now," he said.

Market experts attribute the trend to low interest rates, the failure of non-banking financial corporations in small towns and the expansion of trading terminals in far-flung areas by the country's big two exchanges, the Bombay Stock Exchange and the National Stock Exchange.

A desire amongst a growing number of people to make quick money is another reason for this.

Some of the tier III cities that have witnessed more than 50 per cent increase in the number of investors and are also host to a large investing population are: Chitoor, Guntur, Krishna, Nellore and West Godavari in Andhra Pradesh, Dhanbad in Bihar, Bharauch and Bhavnagar in Gujarat, Ambala and Rohtak in Haryana, Belgaum, Dakshin Kannad, Dharwad and Raichur in Karnataka, Alappuzha, Kottayam and Thrissur in Kerala, Jabalpur and Raipur in Madhya Pradesh, Puri in Orissa, Amritsar in Punjab, Jodhpur in Rajasthan, North Arcot, Ambedkar, Periyar and South Arcot in Tamil Nadu, Bareilly, Hamirpur, Mirzapur and Gorakhpur in Uttar Pradesh, Dehradun in Uttaranchal, and Bardhaman in West Bengal.