The Confederation of Indian Industry (CII) today proposed a series of measures including 1-1.5 per cent cut in interest rate, granting more freedom to insurance and pension sectors to invest in equity, a hike in creeping acquisition limit to 15 per cent and the reintroduction of margin trading for boosting the stock markets.
"In the background of recent rate cuts by the Federal Reserve of the US and the European Central Bank, the Reserve Bank of India should cut interest rates by 1-1.5 per cent. Although this may not spur investments in the real estate sector, it would certainly provide a positive signal to the equity market and industry," CII said in a statement.
As part of the measures to lift the Sensex to over 4,000 points within this quarter, KV Kamath, ICICI CEO and CII national council member, urged for greater freedom to insurance and pension sectors to invest in equities. "Tax breaks, primarily a reduction in the capital gains tax to 10 per cent, would facilitate more retail participation in the market," he said.
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Although the RBI has encouraged banks to go for lending against shares, CII said the 40 per cent margin fixed was too high and should be brought down to 25 per cent. Reintroducing a safe margin trading system was imperative for raising trading volumes on the bourses, it said, adding that margin requirements for financial institutions and foreign institutional investors should be removed.
Although the government has allowed American and global depository receipts (ADRs and GDRs) of companies to be converted into shares that can be traded on Indian bourses, CII said the explanatory memorandum and the subsequent notifications seems to be applicable to only one or two companies. "There is a need to redraft and reinterpret the memorandum to allow real two-way fungibility," it said.