CII says, the Indian capital market is bullish

New Delhi, May 26 (UNI) CII National Council at its meeting held here today, observed that notwithstanding the market crash of May 18 and 19, 2006, the long-term outlook of the Indian Capital market is bullish.

The council said that the market capitalisation has almost doubled to Rs 34,500 crore at the end of last quarter of 2005-2006.

This has been accompanied by a robust commodities/real estate market.

''SEBI as a regulator has effectively been functioning as an independent regulator with statutory Powers,'' observed the Council.

The Council outlined a five-point agenda for a healthy growth of Capital Markets.

Firstly, - Even though shares of companies listed on major stock exchanges are fairly liquid, the options market suffers from lack of liquidity. Enhancing liquidity in the options markets to facilitate trade at reasonable prices is required to encourage investors to hedge their portfolios and facilitate companies to manage risks.

Secondly, there is a clear need to define the short term capital gains with respect to the recent circular issued by CBDT. The Council recommended that any gain arising after 30 days but before 365 days could be termed as a short-term capital gain. Any gain before 30 days could be considered as a trading income.

Thirdly, the Council observed that the banking system needs to operate on a real time basis. The Council felt that the May 19 2006 crash could be partly attributed to the fact that secondary market investors were not able to give margin money to brokers in time. In India, brokers are small and have inadequate capital adequacy.

Risk management Department of stock exchanges as a result curtailed stock trading terminals when the indices slided drastically. The Council observed that a robust technology oriented system rather than a cheques in clearing system could have possibly avoided this debacle.

Fourthly, raising money through Qualified Institutional Placement (QIPs) is a welcome step and CII believes more companies could take advantage of raising resources through this route.

Additionally, the National Council observed that about 70-80 companies have raised resources to the tune of 28 billion Dollars in last two years through Primary markets (through either DR/GDR/FCCB/Preferential allotment route). The raising of resources in primary markets should be encouraged.

These steps, it said would ensure that the capital markets continue to be bullish and corporate grow at a faster place and become world class.

UNI ARB MP GC1640