The capital market in India has grown significantly, but there are areas of weaknesses that are being addressed right now, the head of the Securities and Exchange Board of India (SEBI) said on Monday.
"We have grown quite a bit in the capital market and its penetration, but there are areas of weakness," SEBI Chairman U K Sinha said in his address to the day-long conference on the 'US-India Economic and Financial Partnership' organised jointly by the Confederation of Indian Industry (CII) and Brookings Institute, a Washington-based think tank.
"These areas of weakness become very stark if we discover that there are segments of the geography where a lot of activities are talking place both by way of surplus money which can be invested and also by way of need for raising money," he said. "The approach of the regulator is to provide more and more products. The approach is to provide simplification and convenience to the investors going forward. The approach is also to encourage corporates to raise money domestically," Sinha said in his key note address to the panel discussion on 'Increasing Access to Capital to Stimulate Sustainable Economic Growth: The Road to Deepening India's Capital Markets'.
Observing that a "very, very large" portion of the capital market is concentrated in the eight to ten large cities of India, Sinha said there will be a need to deepen the access of the capital market to small markets and rural areas. "I believe mutual funds can play a very important role in that," he said. Sinha said the Indian capital market is facing two interesting problems these days.
While a large number of companies have raised money, there is no trading by them. He said of late, private equity and venture capital has started gaining some ground. The SEBI chief said the exchange board has taken a number of measures in the recent past. Prominent among these include having the same rules for institutional and retail investors and looking into ways to simplify and make the business environment investor-friendly.
SEBI is also concentrating on governance issues related to listed companies. "We have now insisted that asset management companies must have a voting policy which should be know to people outside," he said, adding that for credit ratings agency, SEBI is taking steps to ensure transparency in their decision-making process.
They have also been asked to ensure that the symbols of all the credit rating agencies are uniform. Sinha said in the last four-five years, India has allowed
a number of new products, currency futures being one of them. The roadmap is to permit more and more derivatives, he said, adding that in a gradual manner, SEBI is moving toward having more and more products.
Sinha said in the 11th Five-Year Plan (2007-12) almost infrastructure spending targets will be met and in the 12th Plan (2012-17), the target would be doubled to USD 1 trillion. The idea is to raise more and more rupee debt, he said.