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Sebi chairman U K Sinha on Wednesday attributed Indian markets’ higher rankings in global surveys to a series of steps taken by the markets regulator.
Speaking at the 4th India Finance Conference 2014 at IIMB, Bangalore, Sinha said the Securities and Exchange Board of India’s steps to include stress testing and development roles have contributed to the rise in the perception of Indian markets.
Another important factor, he pointed out, was the level of corporate governance and protection minority shareholders’ interests. The 2013 Companies Act provides for protecting investors and shareholders.
“We derive powers from the Parliament, but we are not dependent on it. While some regulators are dependent upon government on the financial side, for their budget, SEBI adds its own sources of revenue,” Sinha said.
With Sebi’s mandate being to protect investor interest, develop and regulate the market, Sinha said he sees the three roles complementing each other with its legislative, executive and quasi-judicial powers. Sebi can also pass orders to prevent people from accessing the market, he said.
Sebi has, meanwhile, introduced the Application Supported by Blocked Account (ASBA) facility across 1,000 cities. The regulator is also in the process of introducing electronic IPO, using the same infrastructure as is used for the primary market.
An old criticism by the markets was also high volatility on opening day of an IPO, a phenomenon that has been somewhat mitigated by an auction at a pre-open session. This core auction then sets the benchmark for the opening day, and once the price is set, normal trading gets going.
Since this has started, volatility has died down substantially, Sinha said.
India still has a Foreign Exchange Management Act (FEMA) which allows it to have a category of broad-based funds. "We have to open up the portfolio investment as there’s a lot of people outside the country wanting to bring their money here. As a result of the KYC norms we know who the investor is," he said.
In the past Participatory Notes (PNs) were known to bring in their own money and invest in their own company but that practice has also been stopped. Now, in every future trading, the name of the owners are known as at the end of month we have the data, Sinha said.
Sebi has been deputed to provide information to the government appointed Special Investigation Team on black money. In the activity, some two to three categories are of particular interest, with sovereign wealth funds being one of them, Sinha revealed.
Meanwhile, Sebi has taken three initiatives to regulate the market. With REITS, that has become a very important aspect of real estate, is an avenue for small investors. It releases money blocked by developers and allows investments. Hence, REITs have been well received. There are many taxation issues, and they have been taken up with the government, said Sinha.
It has been similar for infrastructure companies. In this case, Infrastructure Investment Trusts or IITs have been mooted. This should give an opportunity for exit to investors in infrastructure projects and this will be operational from next year.
Sinha also said there is a need to work further on SME investments. “We should allow them to access capital,” he said. “This year 42 have listed and now there are 86 on the SME platform. Their capitalisation has risen, how their capital has risen three times?”
Another is that of providing VCs and PEs an exit option. In practical sense, it was possible only through IPOs. An institutional trading platform allows listing where minimum is Rs 1 million.
Some 18 have listed already. Hence, the VC and PEs are happy, said Sinha.
The Institutional Trading Platform or the ITP provides platform where institutional trading can happen. Taking Indian VC assn. ses and SIDBI adb take to vaious parts of country.
