Responding to suggestions from the captains of India's financial sector that steps should be immediately taken to bolster the sagging capital market, Sinha said that other "innovations" relating to PSU disinvestment are also being looked at.

Sinha said that he was trying to push through the first public sector disinvestment by the end of September. The divestment of Container Corporation of India (Concor) is likely to kick off on September 28.

"I appreciate that the issue of revival of the capital market needs immediate attention which is why I am willing to mop up funds even at these low prices. I hope this will go a long way towards bolstering the markets," he told members of the Confederation of Indian Industry (CII).

"This entire process of disinvestment and strategic sale will have to be completed at the earliest," he added.

In an interactive session, JM Financial chairman Nimesh Kampani pointed out that in the last one year the capital market has lost Rs 180,000 crore in terms of market capitalisation. "This translates in a loss of an equivalent amount of buying power," he said.

Kampani added that the capital market is the backbone of any economy but all companies are trying their best to avoid the equity route for funding their projects. "The government needs to take immediate steps to attract the good companies to approach the capital markets for funds," he added.

The best opportunity that the government now has is to expedite the disinvestment of public sector undertakings. It should also urge the navaratnas to tap the domestic markets for funds instead of opting for overseas borrowings, Kampani suggested.

Taking the cue from Kampani, Kotak Mahindra chairman Uday Kotak said that revival of the capital markets "is the only way to spur economic activity." He pointed out that India's leading infotech companies like Infosys, Satyam Computers and NIIT were all vying for listing on the Nasdaq to make it easier to raise funds from the US markets.

He suggested that the finance minister should initiate steps to make fund raising from the domestic markets more attractive, if possible with allocation to financial institutions.

Ved Prakash Chaturvedi of SBI Mutual Fund suggested that capital gains from investment in shares should be exempted from tax if the same amount is reinvested in the equity market.

Bombay Stock Exchange director Anand Rathi said the government should relax restrictions relating to investment by banks and domestic financial institutions in the capital markets.

"This will bring in more funds into the equity market as the banks and institutions are flush with funds and do not have quality assets to put their money into," he added.

The average cost of housing finance is still very high and the finance ministry should take steps to help reduce these rates, Rathi suggested. "The ministry had announced steps to spur housing activity in the Budget and these are some steps that it has not considered," he said.

On suggestions to hasten the introduction of buyback of shares, the finance minister said: "It is worrying that there is so much hope pinned on buyback of shares. The stock market has done well in the past without buyback and hence there is no reason to feel that buyback will solve all problems."

Divestment panel's views on SPV for privatisation sought

The finance ministry has sought the Disinvestment Commission's views on its proposal to float a non-government company for privatisation of top public sector undertakings, banks and financial institutions.

The core group of secretaries (CoS) on disinvestment had asked the finance ministry on Friday last to obtain views of the commission on its proposal to create a special purpose vehicle (SPV) for offloading government equity in excess of 49 per cent in identified PSUs.