50% of demat a/cs hold no shares

IT’S not just asset management companies in the country that are into the number game for shoring up their assets under management. The two stock depositories, NSDL and CDSL, are not far behind. A significant number of demat accounts — as much as 50% — with the two depositories are without any shares in them, an official with one of the depositories told ET. The number of such accounts usually rises when the stock market goes into a downturn. However, the official said even if such periodic fluctuations were to be discounted, the number of zero share accounts at both depositories would account for nearly 50% of the total accounts. Market watchers say many investors would have opened multiple accounts within the legally-permitted limit, during the IPO boom in a bid to apply for the maximum number of shares under the retail investor quota. National Securities Depository (NSDL), promoted by the National Stock Exchange (NSE) is the larger and the older depository, but the Bombay Stock Exchange (BSE)-promoted Central Depository Services (CDSL) has been catching up in recent years. A detailed email sent to NSDL went unanswered despite repeated phone calls, but CDSL furnished some information on the empty demat accounts. It said around one third of its ‘active’ accounts are without any shares in them. This works out to a little over 17 lakh accounts. “It is observed that this figure increases in a bear market as a lot of investors liquidate their portfolios and wait for the bull phase to start when they resume purchases,” the CDSL official said while explaining the zero balance accounts. Despite the market moving sideways in the past eight months since January, both the depositories have shown fair growth in the number of demat accounts with them. While accounts with NSDL have grown 13% in this period to over 96 lakh accounts, those CDSL have risen by more than 50% to around 53 lakhs. The ongoing rivalry between the two depositories for claiming ownership over maximum demat accounts could be another reason why NSDL and CDSL are not keen to close down these empty accounts. When a stock market investor (called beneficial owner in technical parlance) opens a demat account with a broker or a bank, the latter in turn approaches either of these two depositories, which store shares in the electronic form. In the past 12 months, NSDL and CDSL, India’s two stock depositories, have been fighting each other on a host of issues. CDSL was formed in 1999 and has been aggressively trying to garner market share for opening demat accounts. However, NSDL even today owns more than two-thirds of all the demat accounts in the country.