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Capital Markets Reforms | Advantage zyaada

Though we are a little circumspect of McKinsey’s algorithms in this particular case, the Indian Capital Markets have definitely hit a lull. The SEBI IRDA wars for counting the INR 3 Trillion in New business and INR 6-7 Trillion in Premium renewals Insurance Funds’ Unit linked business ( That will likely be 30-40% of the above corpus and more in case of new business)

Trading volumes have grown by two to three times during the previous rally from 2003 – 2007 to a daily turnover of upto INR 2 Trillion, but the same is languishing today. The Mutual Fund industry is also going thru the throes of a reform induced boycott by intermediaries and agents as allowed commissions and fees have been pruned drastically by allowing investors to directly transact with the Fund House esp. online. Online Equity and F&O broking market share has plateaued at 15% and HSBC Investmart  or BNP Geojit Purchases have also been a dud house party.

Retail Investors have a limited corpus they are turning over between IPOs and Secondary investments and Insurance has been outscoring mutual funds 5:1 in the last 5 years because of the guarantees and the tax eligibility that has been the bane of Mutual Funds with much lesser funds for staffing/tied agents.  Unlike the limited PE investor population, the other retail / large investors in the secondary markets would be much more desirous of even disclosures and a cleaner market framework. These would then imply takeover regulations and subject matter of corporate law like the one that brought the IPL sweat equity feud to fruction this week. And whereis the retail market for bonds, fied income trading, Currency derivatives and even Power and commodities..I do not see market access in action, honestly. Of course the participation of Pension Funds has been picked up as the next item on the agenda too if the report has some basis.

And more importantly reform is required in inducing Mutual Fund houses to adopt closer to trend market purchase and sales as they continue to be lethargic players in the market. Probably not the agenda of reach the small town reforms on the board but these are the reforms that will bring retail investors into the game by choice.

PTI (Hindustan times) Indian capital markets can grow three-fold by 2020 if reforms to increase retail participation, reduce cost of trade and enhance investment by pension funds are initiated, says a study by industry chamber Ficci and consultant Mckinsey & Co.
“In order to enable Indian capital market to triple in size by 2020, reforms are needed…,” it said, identifying low depth in equity markets, less retail participation, high costs of trade and insignificant participation by pension funds as major challenges for the markets.

Market capitalisation of prime bourses in India was about Rs 8.63 lakh crore as on April 16 while the share trade quantity on NSE was 1.37 crore and on BSE 1.17 crore.

Although faced with challenges, equity capitalisation in India has grown over six fold, and trading value over 3.5 per cent in the last 10 years following regulatory reforms.

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This entry was posted on April 19, 2010 by in Financial Markets, Investments, Retail Lifestyle, Uncategorized and tagged .


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