The Hindu Business Line : `SEBI's intervention key to quality of markets'

TWO years after assuming the hottest seat in the Indian capital market, Mr G.N. Bajpai, Chairman of the SEBI is sitting pretty today. "It has been a journey of significant achievements," he said, summing up his Chairmanship so far, before delving in to the details of those achievements in an interview with Business Line.

"When I took over as Chairman of the SEBI, the securities market and the regulator were going through a critical phase. Confidence in the market and the regulator had plummeted. Now the world is agog with the fact that we would be moving to the T+1 settlement system soon. To trudge from a state where the Indian capital market was categorised as not being efficacious to being a forerunner in cutting edge trading and settlement processes is an indicator of the regulator's commitment and efficiency."

T+1 and the entire set of intermediary processes that have brought the markets to this stage of maturity is clearly a sweet spot at the regulator's office.

"Look at CALPERS's decision to invest in India. They are yet to decide on large markets like China and Russia. Philippines did massive amount of canvassing, no one from India has ever even visited them to talk about our markets. The world is sitting up, taking notice and saying they want to be a part of the excitement in India purely on the basis of the quality of our markets."

The regulator has tried to approach the market with a clear view on who the participants are and how they are interconnected.

"We asked ourselves, `How do we bring back the confidence of the issuers? How do we ensure that they would be able to raise money from the markets - comfortably, easily, without hassles and in as much quantity as they want?'

"Once we answered these questions we jumped on to the next step of ensuring participation of investors because the quality of issues that were being brought into the capital markets is really high.

"For both of these to happen, it was important to bring in quality intermediaries who play the game honestly and efficiently, and all this is possible only when the regulator steps in provides right interventions."

Evidently, this is working well. Disclosure standards in India have been acknowledged to be in the top grade in the world and one of the best in Asia by organisations such as the Economist Intelligence Unit. "We have changed regulations and brought in scores of guidelines to ensure the quality of issues and eliminate the fly-by-night operators. Second, our broker positions and margins are being monitored real-time and there is automated disablement of terminals, a practise that does not exist anywhere in the world including US. These are huge safety measures."

The SEBI has also initiated the mammoth task of trying to educate the retail investors of the rewards and perils of investing in the capital markets.

Over 200 workshops were conducted last year and the target for this year is 1,500 workshops across about 400 towns from where trading takes place.

"This would be supported by 800 advertisements published in 14 languages. I am not sure if I want the retail investor who does not understand the market to invest in it directly.

"The investor awareness programmes lay out a list of do's and don'ts. If you do not have the time, you should ideally invest through a mutual fund."

While the achievements have been significant and acknowledged by national and international participants, the SEBI has its work cut out for the future.

"A lot of innovative products will be launched, be it the Indonext initiative, bringing exciting products into the futures and options market, capital guaranteed products in mutual funds and others. On the regulatory side also, I would like to see many more industry bodies conforming to the self- regulatory organisation guidelines."

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