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People open demat A/Cs for MFs, tax-free bonds

The number of new demat accounts opened with India's leading depositories has seen a robust growth in FY16.

Mumbai: An increasing number of investors in the capital markets now prefer to hold their instruments — mutual funds and bonds — in electronic form rather than physical certificates. The number of new demat accounts opened with India’s leading depositories has seen a robust growth in FY16.

While retail participation in equity markets remained subdued due to high volatility in the secondary market, participants said that those who were taking exposures to equities through the mutual fund route and also investing in tax-free bonds were seen opening demat account to hold those investment in electronic forms.

Previously, people used to open demat accounts only if they wish to trade or invest in stocks. According to the latest data, the Central Deposi-tory Services Ltd (CDSL) has recorded a two-digit growth in addition of new client accounts.

The number of new accounts opened with CDSL soared 12.50 per cent to 1.08 crore as at the end of March, 2016 while the National Securities Depository Ltd (NSDL) with a relatively higher base witnessed a 6.25 per cent growth in new account opening. The total number of demat accounts with NSDL stood at 1.45 crore by March.

“Most of my clients have opened demat accounts to hold tax free bonds and mutual fund units in electronic forms. Out of 10 investors who had opened a demat account with us, seven of them did it for holding tax free bonds in electronic form,” said Siddharth Shah, chairman, BSE Brokers Forum.

With interest rate expected to come down, he said investors are showing interest in long tenure tax-free bonds. “The direct retail participation in equities has remained low for some time and the increase in new account opening has not reflected in retail volumes in the equity market,” said Rakesh Somani, past president of Association of National Exchanges Members of India.

( Source : Deccan Chronicle. )
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