Recent Trends in Capital Market1

8/9/2019 Recent Trends in Capital Market1

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An investor, today, need not wait, with his fingers crossed, for a fortnight or more, forgetting crossed cheques or crisp notes for the sale proceeds of his securities. The trading

cycle has been shortened to T+2. This shortening of the cycle has been done in a phased

manner but in a rapid succession from T+5 to T+3 to T+2, all in a matter of two years.

Another material development, which proved to be of immense relief to the investors,was dematerialisation of the scrips. Now 99% of the scrips in the market are

dematerialised. Almost 100% of the trades are in D-mat form. Inconvenience of physical

custody and transfer, tedium of intimating change of address and problems of bad

delivery, late delivery, non delivery and the risks of forgery and frauds have virtually

disappeared or shall I say - have been dematerialised! The benefit is relished but not the

cost. We should bear in mind the maxim no cost, no benefit. There is no free lunch in

this world. Still, there is no denying the fact that there could be a possibility for reduction

in the cost; such possibilities are explored.

At the stock exchanges, robust risk management system has been put in place, Value-at-risk margining and exposure limits, on-line monitoring of margins and positions,

Clearing Corporation and Settlement Guarantee Fund mechanism for trade settlement

all these have made Indian capital market now arguably world class, in terms of

transparency, efficiency and safety.

Antiquated and abused badla system or ALBM stands abolished. In its place, for hedgingand trading purposes, a number of derivatives in the form of futures and options, both

index-based and stocks-specific have been introduced. The sophistication of these

products have not scared away our brokers and investors. Instead, with their native

intelligence, they are as comfortable in the F&O Quarter as a fish in the water. The

vibrancy of F&O segment has surpassed the cash segment in terms of daily turnover

within a short period.

Corporate bonds and Government Securities used to be traded via telephone exchange. Abeginning has been made for their trading on the stock exchange now. As is natural, the

weaning takes time!

Our accounting standards are already principle-based; they have been aligned withinternational standards almost in all aspects, barring one or two. Our disclosure

requirements, both initial and continuing, are on par with global practices.


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The corporate governance and corporate performance do reflect and get reflected in theconditions of capital market. As a market regulator and protector, SEBI is concerned with

corporate governance practice on an ongoing basis. According to the Economic

Intelligence Unit Survey of 2003 regarding corporate governance across the countries,

Top of the country class, as might be expected, was Singapore followed by Hongkong

and, somewhat surprisingly, India. It is significant to note that Singapore and Hongkong

claiming the top positions, was not a matter of surprise, but India coming as third,

surprised the world! It shall be our collective endeavour to eliminate thesurprise

element. As part of its endeavour towards continual improvement, SEBI has got

corporate governance code and practice reviewed, by Narayana Murthy Committee. The

Committees recommendations for refinement were evolved through consultative

process, transparent deliberations and democratic approach. These were posted on SEBIs

website for 21 long days. Thereafter, they were got incorporated in Clause 49 of Listing

Agreement. No sooner was this done, the corporate quietitude was disturbed and a spate

of representations followed. The three major aspects, which disturbed the corporates,

related to definition of independent directors, their nine-year term and whistle blowing

policy.

RESURGENCE

During the last one year, Indian capital market has been regaining its buoyancy. Globally

recognised economic fundamentals of the country and widely perceived robustness of the Indian

Capital Market system have gradually restored the confidence of the investors, global and local,

in the Indian market, to a substantial degree. During the last one year, the sensex has risen by

over 75%. The Indian capital market has out performed many in the world. More importantly,

the primary market too has perked up. The depth and liquidity of the market and its absorbing

capacity has been indisputably proven. The fear of failure of PSU disinvestments turned out to be

unfounded. Some mistakes have occurred. To err is human and occasional systemic fault /

fatigue is not uncommon. Mistakes may happen and do happen; but they should not lead to

paralysis, panic and cynicism; nor should they be allowed to be exploited. Mistakes if any should

be rectified and rectified quickly and their recurrence prevented. If by ignorance, one mistakes,

by mistake one should learn.


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VIGILANCE

However sophisticated, efficacious, fail-proof a system or technology may be, human

intervention is inevitable, for, the system is manned, managed or used by human beings. Human

nature being what it is, and as the human ingenuity knows no bounds, constant regulatory

surveillance and prompt action is necessary. That is what SEBI is trying to do. Armed with

statutory authority and consumed by missionary zeal, SEBI keeps vigil, clamps down appropriate

surveillance actions. Any market misconduct or manipulation are sought to be dealt with

severely in the interest of the market and the investors. Investigations into allegations of

manipulations etc. are getting speeded up and necessary regulatory action is taken, without bias

or prejudice, with no fear or favour. At times, the action may turn out to be deterrent in nature, as

circumstances warrant.

FURTHERANCE

A few more things are on the anvil. Margin trading and securities lending have been introduced

with adequate checks and balances. The Central Listing Authority has become operational to

provide an independent entry-point scrutiny of the corporates to be listed. Straight through

Processing will get broadened market wide in another 3 months time. The Central Registry of

market intermediaries and professionals with unique identification number is under construction.

And, when RTGS is being ushered in, T+1 settlement cannot be far behind! Structural

consolidation, infrastructural improvements, product-innovation, refinement of regulations, and

integrated surveillance should be some of the thrust areas for planned action in the days ahead.

Documents

Recent Trends in Capital Market1