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Rukmani Vishwanath

Mumbai , Dec. 15

RETAIL trading in government securities on the stock exchanges has virtually dwindled to zero transactions within a year of commencement.

In fact, as per the latest available data with the National Stock Exchange, there was no retail trade in G-secs today. For that matter, hardly any deals have taken place in the first fortnight of December.

Retail trading in government securities has steadily declined in terms of number of trades, volumes and value of transactions. It took off with much fanfare in January this year, with the Finance Minister, Mr Jaswant Singh, purchasing 10 units of 11.10 per cent Government bonds for a value of Rs 1,044 in his personal account.

As per the NSE data, in January 293 trades were transacted, amounting to a traded quantity of 1,77,220, to the tune of Rs 219.97 lakh. These figures fell progressively month after month, down to 18 trades in November, for a trading quantity of 1,010 amounting to a meagre Rs 1.30 lakh. These figures look poised to fall further, as indicated in the first fortnight of December.

Despite repeated attempts by the Reserve Bank of India to promote retail interest in the government securities market, this segment has been a non-starter due a variety of factors, like a lack of awareness among the public, interest rate anomalies existing among various instruments of similar tenors, etc., and issues relating to liquidity of these securities, according to analysts.

One senior banker with a private sector bank admitted that although there are some stray enquiries, retail investors are just not interested. "Why should they take direct exposures in the debt market, when there are better options available, like a mutual fund which has the expertise and knowledge in this area?"

Analysts contend that although Section 80 L of the Income-Tax Act allows for a Rs 3,000 worth of tax benefit on the interest earnings on G-sec investments, it is not attractive enough.

A number of quasi-government securities like the RBI relief bonds offer better returns, for which there has been a lot of propaganda. Most bankers and primary dealers feel that to encourage retail participation in the debt market, a lot of awareness has to be generated. Apart from some additional tax sops to attract investors, some alignment in the interest rate structures need to be brought about among the various savings instruments.

Retail investors may be laughing all the way to the bank by riding the boom in the equity markets, but continue to remain bereft of the advantages of falling interest rates in the government securities market.

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