Retail Gilts Trade Loses Sheen After Initial Spurt

Mumbai, January 24: | Updated: Jan 25 2003, 05:30am hrs
Retail trading in government securities (G-Secs) is proving to be a non-starter, and retail volumes have declined drastically since its inception on January 17 this year.

After having garnered massive volumes of 1.9 crore on January 17, the combined volume on The Stock Exchange, Mumbai (BSE) and The National Stock Exchange, (NSE) has declined to a mere 5.5 lakh on Friday.

IDBI Capital senior vice-president MS Gopikrishnan said to expect retail investors to track variables of trades in G-Secs is a tall task. Primary dealers also seem far from enthused about dealing in low-value individual transactions given the transaction costs and the minimal commission. For a 15-year paper, the yield is 8.07 per cent, while an RBI Relief Bond gives an yield of 8.50 per cent for five years with tax exemptions, pointed out sources.

Other schemes such as RBI Relief Bonds, Public Provident Fund and The National Savings Certificate yield better rates than those on G-Secs. The tax benefits are also much higher. It is imperative that awareness about the debt markets be created amongst retail investors for trading to thrive, sources said.

Dealers from other domestic brokerages opined that it is difficult for a layman to fathom the concept of retail trading in G-Secs. Accessibility to G-Secs is also not as convenient as other products, they said, adding that there is also the problem of difficulty in obtaining an exit option. It was pointed out that retail investors would rather invest in G-Secs and hold them until maturity than engage in active trades in the same. There is also a palpable risk that the interest rates will change in the future.