Focus on making stock market healthy, CII chairman tells Centre

The Confederation of Indian Industry has said the government should focus on building a healthier stock market and not worry too much about the movement of indices or speculation, which are part and parcel of any financial market.

In an interview to Business Standard, the industry body's (CII) Chairman President R Seshasayee said, "The government should ensure that the supporting structure of market operations is sound, the regulatory system is working and the system is not being subverted by non-transparent information or non-compliant transactions."

He suggested the government could bring about policy changes to improve the depth of the debt market. This, he said, would go a long way in diverting some investments from the equity market to the debt market, thereby helping to reduce volatility in the stock market.

The current policies did not allow a wide set of investors to invest in the debt market. Changes in the policy, which would widen the investor-base in this market, would allow better leveraging by Indian companies, he said. There was tremendous untapped potential in the country's debt market, he added.

"We have a number of structural issues in this market like restriction on the number of players who can participate in the government securities market. Not everyone is authorised to enter the market and we have restricted the dealers to the current securities market. Since there are restrictions in the government securities market, the corporate bond market is also not developing," Seshasayee said.

Commenting on the recent swings in the stock market, the CII president said, "We have a strong regulatory body today. And I think Sebi is doing an excellent job. Speculation is part of the nature of the market so let us not panic. It should not be construed as lack of confidence in the economy, and these gyrations are reflective of what is happening in other developing markets."

Seshasayee also suggested that banking hours complement the working of the stock market so that settlements were made immediately and volatility was not carried over to the next trading session.

"In today's scenario, we must have 24-hour banking. It should be possible for you to make settlements, so that you do not have the problem of a carryover to influence the market when it opens the next day. And that will bring down the volatility." he said.