NEW DELHI, June 9: The finance ministry has put a Securities & Exchange Board of India (SEBI) move to reduce tradable and alloted lots in high value shares on hold. The attempt was to reduce these lots to 50 or 10 shares.

SEBI wanted the proposal to be vetted in last week's board meeting held in Delhi but it was unable to elicit the sanction of the ministry.

The rationale behind the SEBI move was to allow small investors access to high value shares. The immediate reason for seeking smaller lots was the proposed domestic issue of Videsh Sanchar Nigam Ltd (VSNL). The regulatory agency claimed that since the issue was to be placed in the market at a huge premium, small investors would find it difficult to subscribe in lots of 100 shares.

A cut-off market price was mooted, beyond which tradable lots should come down to either 50 or 10.

The ministry, however, was of the view that the proposal needed detailed scrutiny. Multiple tradable lots would create confusion among investors and this would not help in the evolution of a uniform yardstick for buying and selling of shares in the capital markets.

The fact that small investors would benefit did not seem to cut much ice with the ministry. Investors in the capital market subscribe to or buy shares in accordance with their ability to take risks, though proportionate to their income and asset levels. Merely bringing down the size of marketable lots would not necessarily lead to a larger subscription pattern in high value shares by small investors, the ministry's argument went.In fact, it was argued that large investors, like FIIs, who are expected to be bulk purchasers of high value shares, would find it irritating to deal in smaller lots. Moreover, a change in tradable lots would have to apply not just to new shares that are to be issued but also to already subscribed capital of a company.

Furthermore, linking tradable lots to market prices or share premia would be misleading and confusing. The ministry wanted to know whether marketable lots would change if the share value plunged below the price limit.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.