Financial Daily from THE HINDU group of publications
Saturday, Feb 26, 2005
Financial Daily from THE HINDU group of publications Saturday, Feb 26, 2005 |
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Money & Banking
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Economic Survey Call for strategy to strengthen bond market Our Bureau
New Delhi , Feb. 25 A BROAD policy framework should be outlined to revitalise the bond market and enable it to replicate the success of the equity market, according to the Economic Survey. "A strategy has to be chalked out for the development of the bond market. The bond market has yet to find the policy framework through which the success of the equity market can be emulated," says the survey.It highlighted that the significant drop in turnover, despite the steady growth of the market size through large-scale public debt issuance, in the recent period was a striking manifestation of the weaknesses of the design of the bond market. The survey noted that bond market turnover in 2004 was at the levels seen in 2001 even though the bond market capitalisation had doubled, fuelled by a high volume of issuance. The bond market had not yet obtained exchange-traded futures and options, which could play a major role in price discovery, risk management and liquidity. On the equity market, the survey observed that, in the coming months, "considerable investment appears to be in the pipeline, reflecting confidence by domestic and foreign investors in the economic outlook." It has held that the securities markets were well equipped to engage in information processing and intermediation, and support the investment activities of 2005-06. On foreign institutional investors inflows, the survey has held that most of the recommendations of the committee, chaired by the Chief Economic Advisor, which was submitted in June 2004, are "now under consideration." It has also highlighted that another committee, also headed by the Chief Economic Advisor, was undertaking a policy analysis effort to evaluate mechanisms to encourage FII inflows while curbing speculative tendencies. Net purchases of equity by FIIs amounted to an unprecedented Rs 38,965 crore in 2004.
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