- Although share market values have been on the rise, a revival of the markets has not been achieved yet. Reasons:
- Often there is a time lag between the conception of a project and its financing through stock market route.
- Due to reduction in Investments and savings coupled with govt failures, a number of infrastructure projects have not been executed.
- Although the govt has promised unclogging of these projects, raising resources from stock markets takes time.
- Unlike in other countries where insurance companies and pension funds serve as a source of investment for infrastructure companies, in India there is a dearth of investors.
- Investors, who form a critical element of the capital market, do not receive regulatory support besides being discriminated against.
- Some initiatives of the SEBI that helps promoters unload their shares and boost the capital market completely bypass the retail investors.
- Steps to boost investments;
- To maintain a uniform minimum public float (25%), there is a proposal for rationalisation of public issue norms relating to promoters holding. This will also increase the supply of shares.
- Currently, PSUs and companies with a post-issue capital of above Rs.4,000 crore, need offer only 10%. Although commendable, an increase in the quantum of shares by itself will not boost investments.
- Raising FDI in insurance may help.
- Educating retail investors of the advantages of buying-long dated instruments that provide steady, non-cyclic returns.
- Debt and quasi-debt instruments such as convertible debentures should be popularised.
- Read at: http://www.thehindu.com/todays-paper/tp-opinion/boosting-markets-for-new-issues/article6091178.ece
Exams Perspective:
- FDI
- GDP
- SEBI
- PSU
- Debentures
- Stock Market