‘Keep products simple to attract retail investors’

On the occasion of the launch of the country’s new stock exchange MCX SX, Finance Minister P. Chidambaram emphasised his concern over most trades in stock exchanges being non-delivery based.

“We must put our heads together and find out how a significant number of trades don’t end in delivery. All our markets — the stock markets and commodity markets — are non-delivery based. In the case of options, we find the market has virtually shifted overseas. So these are areas that are engaging Government’s attention.

“In consultation with the regulator, the stock exchanges and the other market players, we intend to take measures that will encourage delivery-based trade and also find ways and means to bring a substantial portion of the options market back to India,” he said.

On competition in the exchange space, he said the constant exit and entry of players makes the market efficient.

“However, we need to underline efficient and non-stifling regulation in the stock market. I would always urge the regulator to stay one step ahead of the innovator. If the innovator employs two nerds, the regulator must employ three nerds,” he said in a lighter vein to a round of laughter and applause from the audience.

While appreciating the role played by the RBI and SEBI in regulating the market and protecting the small investor and minority shareholders, the Finance Minister offered a word of caution to the older stock exchange players and the new one.

“If you want the retail investor in India to participate in the stock market, you have to keep the products simple, demystify the stock market operations. Inject confidence in the investor,” he said.

The integrity of the stock trading should be preserved. Malpractices in Indian stock markets should be got rid of and operations of the stock market should be demystified. Only this will ensure the retail investors’ participation in the stock markets, he said.

GDP to bounce back: On the state of the economy, the Minister said the economy was showing signs of upturn and would return to a GDP growth rate of 5.5 per cent.

“We believe that the upturn has started and in the second half of this fiscal, there are indications of green shoots in the economy. So going forward, I am confident that the economy will return to a growth rate of 5.5 per cent, which is satisfactory but does not make me happy,” he said.

In India, a seven per cent growth rate is an imperative to retain the existing levels of employment, he said, adding that an eight per cent growth rate is imperative in order to absorb new people who will enter the job market.

“I have no doubt in my mind that we will come out of trough and we will climb back to growth rate of between 6-7 per cent next year and then 7-8 per cent in the year after.”

He added that it was important not to denigrate our own performance, observing that FIIs were beginning to invest more in our markets even while DIIs were selling.

“Foreign companies are willing to explore opportunities to invest in India while Indian companies are looking for opportunities to invest abroad. I think we must rediscover faith in our country, in our own economy. We can recapture the magic of 2004–08 when India’s economy grew at an average of 8.5 per cent,” he said.



(This article was published on February 9, 2013)
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