New Delhi, Mar 12: To revive the ailing Over-The-Counter Exchange of India (OTCEI), the Planning Commission has suggested compulsory listing of all new issues on the exchange before graduating to other bourses.``This institution (OTCEI) needs to be revived and energised with all new issues listed first with OTCEI. The companies should list on other exchanges only after they establish a minimum track-record,'' the Commission has stated in the draft of the ninth five year plan. It has also suggested broadening of the market making effort by participation of the major financial institutions, including banks to energise the primary market and OTCEI. The commission has also called for various additional benefits to various market intermediaries operating on the exchange for its revival.To increase liquidity on the exchange, it has called for increased foreign institutional investment above the prescribed limit on other bourses. Currenlty, FIIs can hold a maximum of 30 per cent of a company's equity. Planning commision has also said that restriction on forward trading (`badla') should be less stringent on OTCEI compared with other exchanges.
The Commission has also suggested various measures to revive the primary market, which has witnessed a slump in the last 18 months.
In the draft plan, the planning commision has said that there is an urgent need to revive investor confidence in the primary equity market and has sought active participation of mutual funds and financial institutions.
``Neither the banking system nor the development financial institutions are involved in any significant manner in primary issues,'' the commission stated.
Expressing unhappiness over the role of mutual funds in the primary market, the panel ha said, ``A number of mutual funds were set-up in order to play the intermediary role, but these, too, could not effectivly perfrom the disciplinary function and most of them withdrew from the primary market''.
``The involvement of mutual funds in the primary market is essential for the healthy growth of industry and revival of investor confidence,'' the draft stated.
On the over-pricing of new issues, which led to investors apathy towards the market, the planning commission has put the responsiblity on merchant bankers as it is the right institution responsible for advising the issuing company on price of the issue.
For greater disciplinr in the primary market, it has suggested stringent norms for recognition of merchant bankers along with their supervision.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
