Bhave, who just returned from roadshows with FIIs and global custodians in New York, London and Boston, jointly organised by NSDL and the HSBC group, told The Financial Express that his interaction with about 60-70 top FIIs and leading global custodians revealed that they are no longer worried about putting in money into the country's equity markets owing to settlement risks.

"A large number of FIIs stayed away from the country owing to settlement risks in a paper-based regime. This is over. They are all keen to come and invest in the country-the timing and the quantum of making these investments is, however, up to them," said Bhave. Interestingly, Bhave pointed out that the volume of trades, post-demat, have increased significantly.

"Asimple example is with regard to the stocks which were added to the compulsory demat trading list. The trading volumes in these scrips have gone up by about 10 per cent in a month. The market as a whole is saying that it wants to trade in a demat regime and FIIs feel the same," he said.

Bhave said that on an average FIIs have dematerialised 80-90 per cent of their portfolio and are keen to know by when they can take up this level to 100 per cent. "They are not touching paper anymore. All settlements undertaken by them are now in the demat mode," he said.

FIIs have off late been pumping in a lot of money into the Indian markets and certain sections of the market believe that this could be due to the fact that they are more confident now of investing here. The feedback from FIIs only proves this theory. Earlier, owing to stringent laws abroad, a large number of funds were not allowed to invest in India because of an inefficient settlement infrastructure.

Early this year, SEBI made it mandatory for allinvestors to trade in demat shares with regard to select securities.

This list now includes the entire Nifty and Sensex stocks. These stocks account for about 80 per cent of the trading volumes at the bourses but FIIs are now keen that the list is expanded fast so that they can dematerialise their entire portfolio and eliminate risk.