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IOB chief hopeful of capital market revival

Our Bureau

CALCUTTA, Sept. 18

THE capital market, now virtually in the dumps, is sure to pick up within a year or so, according to Mr R. V. Shastri, Chairman and Managing Director, Indian Overseas Bank (IOB).

Mr Shastri gives several reasons for his optimism. First, a number of corporates have already reached the limit in regard to their debt exposure. Mr. Shastri, therefore, asks: Where can they go now, except access the equity market? It was for this reason , that the debt market has shown signs of stagnancy in the past few months, after remaining fairly active for some time.

Next, the financial sector reforms were yet to come full circle. Once this was achieved, possibly in the next few months, the capital market, in his opinion, would surge.

Besides, the IOB CMD points out that only a handful of companies were seeing share price volatility, whereas many companies whose fundamentals were strong had been trading steady.

Describing the current situation as ``part of the cycle'', he seemed convinced that this could not carry on indefinitely. But, the situation has to change; the present phase, unlike the earlier one, has been rather long.

Later, while briefing newspersons about the bank's forthcoming IPO, he said the issue was being offered at par ``to reward the public''.

The bank has set a gross profit target of Rs 250 crore for the current year, up from last year's Rs 188.23 crore. ``In the first five months of the current year, our profit has been more than expected,'' he observed.

As per the RBI guidelines, the banks are not permitted to keep open positions on their foreign exchange transactions beyond the prescribed limits on a daily basis. The current volatility in forex market had forced the bank to keep position much below the prescribed limit of $5 million a day, he added, pointing out some day it would be even as low as $50,000.