Opinion - Editorials   

Regulation comes of age

The Securities and Exchange Board of India's annual report for 2005-06 recapitulates the major regulatory initiatives during the past year. Many of these are neither new nor path-breaking. For instance, the long-overdue steps to develop a vibrant corporate bond market are proceeding at a measured pace. SEBI has appointed a task force to implement the R.H. Patil Committee's recommendations. Also, it is perhaps inevitable that some major capital market initiatives such as those dealing with ownership and structure of regional stock exchanges should take some time to fructify. SEBI notified the demutualisation of a majority of these exchanges and appointed an expert group to help them decide their future. It is in the process of setting up a National Institute of Securities Market for teaching and training intermediaries. That and the more than 1000 investor awareness programmes that were conducted during the year will help in fulfilling the regulatory mandate of educating investors and making capital market intermediation more professional.

The primary market, which remained buoyant during the year, had a fair share of the regulatory initiatives. These include the introduction of proportionate allotment and margin requirement for Qualified Institutional Buyers (QIB), which has proved beneficial to ordinary investors. During the year, 139 companies accessed the capital market and mobilised Rs.27,382 crore. Disclosure requirements in the prospectus have been rationalised and a proposal to rate new issues on an optional basis has been implemented. In secondary market regulation, demat charges were rationalised and a separate window for execution of block deals was opened. During 2005-06, gold exchange traded funds were introduced. The efficacy of market surveillance, a key function of the regulator, is set to get a further boost with the decision to put in place a world class, comprehensive, integrated market surveillance system across stock exchanges and market segments. These and other initiatives are to be seen in the context of an impressive performance by the capital market last year. Turnover in the cash segment was Rs.23,90,103 crore, a rise of more than 43 per cent over the previous year. The ratio of market capitalisation to the country's Gross Domestic Product was as high as 85.6 per cent. Mutual funds mobilised a record Rs.52,779 crore and net investment by foreign institutional investors in equities was more than Rs.48,000 crore, the highest ever in a single year. All these are partly at least a tribute to the efficacy of capital market regulation. As on March 31, 2006, the Sensex and the Nifty stood 73.7 per cent and 67.1 per cent higher respectively on a year-on-year basis. Since then they have been on a roller-coaster ride, plunging sharply in mid-May and rallying thereafter. The absence of any major controversy in such extraordinary times is proof that capital market regulation has come of age.

Printer friendly page  
Send this article to Friends by E-Mail

Stories in this Section

Murder most vile
Regulation comes of age
Eleventh Plan ignores food and nutrition insecurity
Battles within before the big fight
India-ASEAN dilemma on trade
Selling English to the "natives"
Corrections and clarifications
Welcome decision
Deplorable
Baloch unrest
Mid-air drama
Chennai incident

Copyright © 2006, The Hindu. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu