Mumbai, March 4: The benchmark indices of the Indian capital market should be changed with the same agility that can match the swiftness with which the US Federal Reserve understands the moods of the capital markets and effects rate adjustment measures intended to perk up the market sentiment in that country."Equity prices have a long term growth perspective. The problem with Indian market was to get saddled with the same old indices even in the changing scenario. The composition of indices should change according to the changing sentiments in the market," Unit Trust of India (UTI) chief general manager (research, policy and planning) SS Nayak said while addressing a workshop on Union Budget-2001 organised by the South Indian Education Society (SIES) here on Sunday.During the last eight years, the benchmark US index Dow Jones Industrial Average (Dow) went up by over 2000 points mainly because the Federal Reserve has taken due cognisance of the mood and perception of the market in changing interest rates, Dr Nayak said. On the other hand, Indian market has not posted any discernible growth over the last few years, except for peaking to new highs and coming back to about 4000 points. Its not that all the stocks were not performing, but the underlying sentiment is changing towards different groups of stocks.
In the backdrop of the Kargil war, oil price hike and irregular monsoon resulting in floods in some places and finally, earthquake, the Budget-2001 was a commendable one as it was not `harsh' on taxpayers again, Dr Nayak said.
The budget was also anti-inflationary as the government borrowing programme is directed more towards market than the Reserve bank of India. Huge borrowing from the central bank would have led to higher inflation due to subsequent monetisation of such loans, he added.
Measures initiated in the budget to take rupee closer to full convertibility like permitting liberal corporate investment abroad, fungibility of ADRs/GDRs with domestic stocks and hike in FII investment limit to 49 per cent would also boost the capital market sentiment, he said.
Participating in a discussion on "Capital Market: An Outlook", DSP Merrill Lynch assistant vice-president Daval Dalal said that it was not necessary for the finance minister to force interest rate cut. Instead facilitating the same would have made the market to do so over a period, which also warms up the market for the same.
Darashah & Co MD Dara Mehta and Kotak MF chief investment officer SM Rajan hailed the move to modernise the debt market and to facilitate reaching it out to retail investors. Mr Rajan said that the debt market was absolutely inaccessible now to retail investors till now, but the case with government securities was a bit different.
However, First Global chairman Shankar Sharma was sceptical about the success of debt market instruments. "Even in the US, debt market products did not make a mark and their liquidity is very poor," Mr Sharma added.UTI Institute of Capital Markets chief executive officer Simon Masceranhas said that the decision to bring down the distribution tax and removal of surcharge would expand disposable income of the people.
Copyright © 2001 Indian Express Newspapers (Bombay) Ltd.
