The Hindu Business Line : Seamless norms for primary market on cards

Mentioning the problems faced by investors during the ONGC public issue, the Survey stated that a taskforce has been set up to bring in seamless functioning of the primary market without human interface, similar to the secondary equity market. At the time of the ONGC public issue, there was a hue and cry over wrong allotment of shares to applicants by the managers of the issue.

Further, the Survey said the derivatives market is growing at a much faster pace compared to the equities segment. According to the Survey findings, the equities spot market transactions grew by 72 per cent during the year from Rs 93,000 crore in 2002-03 to Rs 1,60,000 crore in 2003-04. On the other hand, the equity derivatives market grew by 384 per cent from Rs 44,000 crore in 2002-03 to Rs 21,400 crore in 2003-04.

The Survey said that in following the increase in trading activity, the effectiveness of the existing risk management system operating at the NSE, through the National Securities Clearing Corporation (NSCC), had faced a real world test on April 10, 2003, when Infosys prices fell 26.8 per cent and Mastek prices fell by 49.2 per cent on a single day. It was again tested on May 17 when the Nifty went down by 11.3 per cent within the first 15 minutes of trading and then again by another 5 per cent when trading was resumed.

The next step for risk containment would be to increase the interface between the clearing system and the banking system, according to the Economic Survey.

It said that the primary market staged a strong recovery during the year led by Maruti Udyog and some PSU banks witnessing a six-fold growth in fund inflow, following which equity market capitalisation zoomed from Rs 72,500 crore in March 2003 to reach Rs 1,37,700 crore, which was almost as big as the banking system in terms of financial intermediation and worked out to 49 per cent of the GDP in the last fiscal.

According to the Survey, the strong interest displayed by FIIs in the Indian market during fiscal 2003-04 is encouraging and may continue if there are no exogenous factors. Net FII inflows, comprising both debt and equity, increased from Rs 2,822 crore in 2002-03 to Rs 48,968 crore last fiscal.

The Survey also noted that the venture capital industry in the country has not grown to a significant size. A total of 44 SEBI-registered venture capital funds have raised Rs 1,750 crore from domestic and foreign investors and have invested Rs 1,415 crore in 409 companies. Out of these, even if one out of 10 VC projects goes till the IPO, then one may expect around 40 IPOs over the next two to three years, the Survey said, and added that a steady stream of profitable exits (where VC funds sell out their holding of a start-up) are required for the sustainable growth of the VC industry.

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