Brokerages lure small-town investors with equity scheme
Dec 19 2012 , Mumbai
The idea is to lure them into the market, and the vehicle offered is the tax-saving Rajiv Gandhi Equity Savings Scheme.
The scheme allows individuals with annual income below Rs 10 lakh to invest up to Rs 50,000 a year in the scheme.
Satish Menon, executive director of Geojit BNP Paribas, said his firm was targeting corporate houses and making presentations on the scheme. “We are confident we could add new clients next year onwards,” he said.
Motilal Oswal, chairman and managing director of Motilal Oswal Financial Services, said his firm was training sub-brokers and franchisees across the country to get people to invest in the scheme.
“We are creating awareness and we hope this would do a world of good for the long-term in diverting a part of their savings into equities,” he said.
B Gopakumar, Kotak Securities executive vice-president and head of broking, said prospective investors in A and B cities would be the first target to be induced to invest in the scheme.
He expected the investor base to widen with new entrants next financial year onwards. “We have seen major increases in assets under management (AUM) of equity-linked saving schemes because of the tax benefits involved,” he said, and hoped that a similar success might come with direct equity investments through the Rajiv Gandhi scheme.
Another industry official pointed out that though the equity markets gave significant returns since 2002, the small investor had not been able to participate in this in a big way.
According to data, only three per cent of the population invests in stocks.
“There are signs of sentiment improving. If the IPOs and the secondary market give better returns in 2013, more investors can be expected to enter the market through the Rajiv Gandhi Scheme,” said Oswal.
There are just over 12.5 million demat accounts with National Securities Depository and another 8.15 million accounts with Central Depository Services. Several of these accounts are idle, with no investments, or receive no new investments. Brokerages will surely target these ‘low hanging fruits’ before seeking out new investors, say industry officials.
To avail of the new scheme, says a note issued by the tax department, a new retail investor must open a demat account. Existing demat account holders who have not made any investments so far are also eligible. They must make investments in eligible securities in one or more transactions in a year in which a deduction is claimed. The holding period of eligible securities is three years.
Eligible securities include shares in BSE100 and CNX100 indices, public sector Maharatnas, Navratnas or Miniratnas, units of exchange traded funds or mutual fund schemes. Follow-on public offers and new fund offers of eligible ETFs and mutual funds and IPOs of PSUs also qualify.
In the second year, an investor can sell securities worth Rs 20,000 but needs to buy other securities worth a like amount. Till the third year securities worth Rs 50,000 will have to be maintained in the demat account.
Gains from the scheme can be realised after a year. This is in contrast to all other tax saving instruments.