Securities and Exchange Board of India (SEBI) Chairman U. K. Sinha on Tuesday called for the need for introspection and developing business plans that help larger participation in the capital market.
India definitely has an opportunity to figure as a favoured financial destination if “we introspect and improvise,” said Mr. Sinha while inaugurating the Capital Market Summit organised by the Confederation of Indian Industry (CII) here. He also mandated the market players to innovate products with a social purpose taking into account the customer needs.
The SEBI has enhanced its surveillance capability and has also introduced mechanism to examine its organisational structure to strengthen investor trust.
He said that in the recent past, certain risky products were introduced in the markets across the globe and these products failed between regulators. Hence, a clear regulatory mechanism needed to be devised, felt Mr. Sinha.
He felt that communication between customer and intermediaries needed to be clear and “we need to adopt compliance culture to enhance the trust. Besides, the products introduced should serve social purposes and needs rather than just being innovative so that retail participation is facilitated. Mr. Sinha said that efforts could also be taken to channelise savings of pension and provident funds to capital markets and assured that the SEBI would support such initiatives.
He also assured that the SEBI would definitely protect investor interests and strive to develop and regulate the markets. In this context, he said the market regulator had taken steps to have a complete review of the IPO (initial public offer) process. He also underlined the importance of KYC (know your customer) as a crucial national and international requirement and said that SEBI regulations in this regard were drafted.
He said that SEBI's risk management system had stood the test of time and urged the market players to take risk management seriously while keeping abreast of trends in technology adoption and high frequency trading.
The SEBI chief said the recent SEBI regulations on Alternate Investments and Financial Advisors were major steps to protect the interests of domestic investors.
Speaking at the summit, Uday Kotak, Chairman, National Committee on Capital Market, CII, and Executive Vice-Chairman and MD, Kotak Mahindra Bank, drew attention to the current trend of financialisation of the real economy where real economy products such as gold and real estate were preferred to equities as an asset class and equities face competition from these products. He highlighted the need to reform the tax structure and rationalise transaction costs to really make the markets more liquid and broad-based.
Commenting on the increasing lack of depth of Indian equity markets, he said that the market structure in India was dominated by options and to some extent by futures while cash market lagged behind. He underlined the need to improve this structure such that the cash market thrives dominantly in the interests of investors and traders.
Mr. Kotak also indicated the need for kick-starting the primary market, not just through regulation and policy initiatives but through a proactive role by market participants and intermediaries. He underlined the need for developing a vibrant debt market that provided deep pools of long-term capital for financing growth. He further stressed on the need for developing trust between companies, market participants and intermediaries by enhancing levels of integrity, transparency and governance and stated that the role of exchanges was important in this respect.
