11 lakh demat accounts added

Data collected from National Securities Depository Ltd (NSDL) and Central Depository Services India Ltd (CDSL) revealed that number of demat accounts with the two service providers went up to 51 lakh on December 31 from 40 lakh on March 31, 2003.

CDSL assistant vice-president (operations) C D Khambata attributed the growth in new entrance to the appreciation of stock prices at secondary market as well as revival of the primary market.

"A large number of investors, who were sitting on physical shares for the past couple of years, suddenly realised they must have demat accounts to book profits. A section of investors targeting public issues are opening fresh accounts as well," he explained.

According to existing guidelines, an investor cannot trade shares without having a demat account. Most companies have started distributing public offers through demat route only.

Maruti Udyog, for example, allotted shares of its public offer through the demat mode.

Even if physical shares were alloted, as it was the case with UCO Bank's IPO, investors could sell shares only through demat mode.

The larger portion of the new accounts were with NSDL, the country's largest depository service provider. The number of active demat accounts with NSDL went up from 37.95 lakh on March 31, 2003, to 46.12 lakh on December 31, 2003.

CDSL, during the period, saw a rise in number of new clients from 2.47 lakh to 4.80 lakh.

NSDL data revealed that the number of accounts was almost stagnant for one year from March 2002. Number of demat accounts with NSDL was 37.95 lakh on March 31, 2003, as against 37.18 lakh on March 31, 2002.

The rush for holding demat accounts started after March 2003.

Market watchers said the trend of more investors entering the securities market would strengthen in the years to come.

"Investors are yet to realise the pain of 6 per cent return on GoI bonds. A most conservative investor can earn 15-20 per cent returns from stock market. There is no other instrument that can match this," said an analyst.