MUMBAI, March 3: The market is not too sure of which party is coming to power at the centre. It is slightly more sure of getting a stable government. One thing it is quite sure about, is that the new government would seriously need to look at reviving the capital markets. With the government at the centre expected to be in place over the next few days, The Financial Express spoke to a cross section of market participants to elicit their views on what should be the agenda of the new government with regard to the Indian capital markets. Primary market expert Prithvi Haldea
The primary market is going to remain in its current state for atleast 4-5 months after the new government comes to power. This too if certain measures to boost the markets is taken. If the general investment scenario remains on an upswing then one could see the primary market picking up in the future.
The immediate steps that need to be taken include a complete embargo on GDR issues by public sector units. The disinvestment ofthese PSUs should be done only to domestic investors. This can be done by following a policy where 10-15 per cent of the issue is earmarked for institutions and is first auctioned to them. The price at which the auction takes place should be used as the benchmark and the small investor should offered a price 15-20 per cent lower than this one.
Market intermediaries need to be more responsible. Either there should be mandatory book-building or intermediaries should be forced to compulsorily underwrite the issues they are lead managing. The government needs to review the entry norms for companies to tap the market. These need to be made more appropriate to the Indian scenario.
HDFC chairman Deepak Parekh
The government needs to push economic reforms and infrastructure investments along with the emphasis on housing. This will kickstart demand in the cement and steel sectors. This in turn will give off positive signals to investors at large. Implementation of economic decisions is what we have tolook at which would leave a good impact on the markets. Irrespective of the composition of the government which comes to power, we need one which will provide excellent leadership and ensure that decision making process is expedited.
Price Waterhouse principal consultant Dennis Grubb
The new government would need to institutionalise the equity and debt markets and help create a transparent and efficient market. If the new government continues the reforms process it will boost confidence in the markets. There is need for greater regulation and Sebi needs to be armed with more powers. The development of the secondary debt market needs to be facilitated. There is need for greater coordination between the ministry of finance, RBI and Sebi. Above all India needs a comprehensive securities law. The work initiated in this regard needs to be speeded up.
Anagram Wellington AMC MD BG Shetge
The impetus from the government should be on revival of the mutual fund industry. Besides banks andfinancial institutions, investors look to a mutual fund to invest their savings. Hence, mutual funds can help revive the capital market as a whole. For resurrection of the markets we need a large number of big players with deep pockets who can compete with the foreign institutional investors. The immediate steps that need to be taken are doing away with the lock-in period of 30 days for Money Market Mutual Funds (MMMFs) and allowing Equity Linked Saving Schemes (ELSS) to invest in debt oriented instruments as well, which could help in giving investors regular returns.
Tata Services Ltd economic advisor SS Bhandare
Keeping the political scenario neutral, the government needs to address various issues related to industrial recovery and resurgence. The morale of the investors has to be re-boosted. Considering the fact that the `business confidence barometer' is so low, unless there is a promising move by the government, we cannot expect a kickstart. They have to work out strategies to initiatesectoral industrial growth. The most important task would be to stimulate investments in the manufacturing sector, which should be in the nature of long term investments even in the infrastructure sector.
Considering the growing importance of capital markets and the linkage between the capital markets and the corporate sector, the government needs to look at reviving the capital markets. Providing incentives for households to rechannelise their savings into the equity markets and promoting venture capital funds could help revive the capital markets to some extent. The external factors have been lagging far behind.
We have forgotten our goals of 18-20 per cent exports. The obsession about fiscal deficit should be curbed for capital infrastructure spending is the primary requisite for reviving the economy. The government needs to identify the nitty-gritties of the economy. Instead of being led into the vindictive approach of blaming their predeccesors, they should work on policy implementation. Lack ofpolicy thrust in the first six months could be more disastrous for the nation.
UTI Investment Advisory Services CEO Satyendra Nayak
The government's first priority should be to boost industrial and economic growth. If the industrial growth is revived the capital markets will once again become buoyant. The fact that stocks which were undervalued for over 2 years have suddenly caught fancy of the market, shows that the reforms in the industrial sector will help revive sentiments in the capital market.
Once the market sentiment is revived it would be easier to go in for PSU disinvestment and mobilise public savings. Currently, providing fiscal stimulus will be much more beneficial, rather than stressing on the monetary aspects like that of interest rate scenario. The Indian economy has lot of unused potential in the form of steel, cement and paper industry. The auto industry also has a lot of unutilised capacity. In a nut shell the government needs to pursue those policies which would boost thecapital markets.
Allianz Capital chief investment officer Samir Arora
Though there is no clarity on the political front, what we need from the party which comes to power, is a quick budget, which could push in for large projects in the infrastructure sector. Nothing specific is actually required to revive the primary or the secondary markets. Within the given regulatory framework, the market should be left to independent forces to decide on the movement and sentiment. Reviving the industrial sector has to be the first priority.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
