The Securities and Exchange Board of India (Sebi) has made it mandatory for investors having a net delivery obligation of more than 5,000 shares in the 30 scrips comprising the Bombay Stock Exchange sensitive index (sensex) to make the settlement in demat form, from the settlement beginning January 4, 1999.
This step is expected to increase the participation of high networth individuals in dematerialised trading in the sensex scrips.
Sebi chairman D R Mehta said the 5,000 share limit would be reduced over time to get more investors to trade in the demat mode. "We are trying to push this and at the same time make sure that the effort is painless," he said.
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The working group on demat trading, constituted by Sebi, yesterday also announced that stock exchanges where carryforward trading is allowed will be required to accept vyaj badla shares of companies that have signed agreements with the National Securities Depository Limited (NSDL) only in demat form from the settlement commencing January 4, 1999.
Of the 150 companies that comprise the BSE specified group in which carryforward trading is allowed, 100 companies have already joined the NSDL, Sebi officials said.
Sebi has also decided to include units of UTI schemes _ Mastergain, Masterplus, Master share and Mastergrowth _ in the list of scrips in which dematerialised trading has been made compulsory for institutional investors from December 15, 1998.
The 24 sensex scrips in which settlement has been made mandatory for investors having a net delivery obligation of more than 5,000 shares from January 4, 1999, are BSES, Bajaj Auto, Colgate, Glaxo, Grasim, Gujarat Ambuja, HLL, HPCL, Hindalco, Reliance, ITC, Tisco, Telco, ACC, Mahindra & Mahindra, NIIT, Ranbaxy, Castrol India, Tata Chemicals, Indian Hotels, MTNL, Nestle, Novartis and Tata Power. The other six sensex stocks are already in the mandatory demat list.
Sebi has also added Wipro and VSNL to the list of 10 scrips for compulsory demat for all investors from January 4.
Sebi, in August, had announced that all trades had to be done in the dematerialised form from January 4 in the following 10 scrips: SBI, ICICI, L&T, HDFC, BPCL, IDBI, Infosys Technologies, BSES, Bank of India and IndusInd Bank.
Sebi's decision to peg the net delivery obligation at 5,000 shares for individuals to dematerialise their holdings was taken keeping in mind that only 82,000 depository participant accounts have been opened so far and that some retail investors may have a problem in their share transactions if the level was too low.
At its next meeting in November, Sebi will consider further expansion of the list of scrips for compulsory dematerialisation by taking into account the companies that have signed up with NSDL.
The working group, which comprises representatives of FIIs, custodians, stock exchanges, mutual funds and the NSDL, reviewed the progress of demat of securities and trading in them.
The group felt there was a satisfactory increase in the list of scrips dematerialised and the demat delivery volumes.
An official statement from the committee stated that the bye-laws of NSDL have been amended and provisions made to enable DPs to send quarterly statements to clients instead of fortnightly.