Our respondents may have been rather harsh on the reforms in this area. For, despitethe finance minister’s proclaimed ignorance about the stock markets, his tenure has seen a radical transformation of the capital markets.
From free pricing of share issues to allowing FIIs in, from giving theSecurities and Exchanges Board of India (SEBI) the teeth the watchdog sorely neededtosetting up world-class computerised share trading systems, the reforms have beendramatic and far-reaching. "Thanks to the National Stock Exchange (NSE), we havemoved from a quote-driven to order-driven market," points out U.R. Bhatt, chiefinvestment officer, Jardine Fleming India. In fact, over the last few months, beginningwith, and courtesy, the Reliance controversy, the NSE has overtaken the Bombay StockExchange ( BSE) as the country’s leading bourse. And bourses across the country, withthe BSE and the Delhi Stock Exchange (DSE) leading the way, are computerising theiroperations at breakneck speed just to stay in competition with the NSE.
The SEBI has been given the power to regulate stock exchanges, merchantbankers and other primary and secondary market intermediaries. Disclosure standards havebeen improved, prudential norms introduced and issue procedures simplified. The SEBI hasalso introduced a code for public issue advertisements to ensure honest disclosures. Thepractice of making preferential allotment of shares at prices unrelated to the prevailingmarket prices has been stopped. Private mutual funds have been permitted. There are newregulations in place governing takeovers and acquisitions, which have shot up in theliberalised atmosphere.
The results are showing. In 1990-91, cor-porates raised Rs 11,045 crorefrom the capital market. In 1994-95, they raised more than four times as much: Rs 44,793crore.
But if there’s one black mark against the Government vis-a-visstockmarket reforms, it is its failure to set up depositories, which would have done awaywith all those slips of paper that constitute capital market trading today, a system thatforgers can easily take advantage of. "The current settlement system is a majorhindrance to large FII inflows. Introduction of a depository should be a nationalpriority," says G.P. Pande, general manager, ANZ Grindlays Bank. Adds Bhatt: "Ittotally beats me as to why the Governmentdid not move on the depositories front earlier.It wasn’t something politically sensitive at all." The Depositories Bill mayfinally be pushed through in the short pre-election Parliament session coming up soon
