``Buy-back from the open market may make the situation open to abuse as shares prices could get inflated when companies announce plans to buyback their shares,'' Browne added.

The HSBC chief executive also said there should be transparency in the buy-back guidelines so that all the shareholders (specially small) get equal opportunity. ``Buy-back should be on proportionate basis so that every shareholder gets equal opportunity,'' he said. Browne said absence of complete transparency could lead to promoters selling their shares to companies at inflated prices and making preferential offer after two-three years when prices have dropped.

Hence, the investment banking arm of HSBC group chief said guidelines were very important as the ordinance issued by theGovernment has stated companies can issue securities after two years of buy-back. However, he said he had reservations regarding the usefulness of buy-back instrument in enhancing shareholders value in the Indian context as very few companies in the country were cash rich.

Browne also said that buy-back was effective in developed or perfect markets, while Indian markets were still in developing stage. ``In the developed economies where there are not much investment opportunities, cash rich companies or highly capitalised companies can go for buy-back,'' he said, adding that these situations do not exist in the Indian corporate sector.

However, he said buy-back could be an effective way for disinvestment process as public sector units (PSUs) listed for disinvestment are cash rich with high equity base. ``PSUs can buy-back their shares from government and reduce centre stake in the state owned companies,'' he said.

Commenting on buy-back as an effective way for reviving stock markets, Browne said `it is aby-product to prop up individual stocks but not to improve sentiments in the stock markets.'