The Hindu Business Line : Markets turn more dynamic

OPERATING in some of the most technology-savvy environments in the world, the Indian capital markets have witnessed unprecedented growth in trade volumes, transparency, accountability, supervision and regulatory framework, during the last decade.

Cashing in on the power of on-line trading, demand-supply is squared off on-line and transactions are completed instantaneously. This has helped the volumes to surpass all previous levels.

Substantial amount of liquidity in the markets has also helped to propel the Indian stock market to its present heights. The markets have risen by more than 50 per cent in a short span of 9 months and also corrected by more than 10 per cent within the past month, Mr T.S. Anantharaman, Chairman of Peninsular Capital Markets Ltd, said.

With an increasingly prominent and growing status as the technology and services hub of the world, the Indian growth story is very much on track. The export growth is matched by the domestic market deriving its impetus from improvements in infrastructure along with reforms in economic and monetary policies.

But the information technology has been the pivotal factor that has helped to inject a new dynamism into the markets. The matching of demand and supply online had resulted in instantaneous transactions, reducing the period time for delivery and settlement and the volumes surged up as a result. Derivatives and other futures have been introduced into these markets, to limit the risks that the new information technology offers.

They were designed to afford protection to investors, but now it turns out that the derivative market is the riskiest of all. The risks appear to increase with increasing information instead of diminishing, as we would like to believe, Mr Giby Mathew, Managing Director of JRG Securities said.

Time, resources, manpower and sustained staying power have become imperative to stay on in the race and a large number of the retail investors have opted out of the market, Mr C.J. George, Managing Director of Geojit Financial Services said.

Traditionally in India retail investors entered the market through the IPO route as IPOs were priced in their favour. However the pricing of new IPOs are in tune with the secondary market valuations and hence the new breed of retail investors have not been making the kind of profit that created the frenzy of the earlier decade.

Notwithstanding these trends in the market, Mr Prince George, Chairman of Select Stock Brokers, said that the general trend in the market remains positive and there is still sufficient scope for forward movement and for further investments.

The markets are driven by liquidity at present largely fuelled by Foreign Institutional Investors.

FIIs have already pumped in close to $3 billion during the first quarter of 2005, Mr Thomas Muthoot, Managing Director of Muthoot FinCorp said.

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