ASSOCHAM calls for 49% FDI in stock exchanges

New Delhi, June 25 (UNI) With a view to strengthen Indian capital market and facilitate stock exchanges to establish global alliances and brands, the Associated Chambers of Commerce and Industry (ASSOCHAM) has submitted a comprehensive paper to the Union Finance Minister, seeking guidelines for entry of Foreign Direct Investment (FDI) up to 49 per cent.

ASSOCHAM has pointed out that alliances are now necessary for the stock exchanges to continually restructure and upgrade themselves based on the latest technological advancements in trading and information dissemination technology.

Currently, the stock exchanges are only competing with each other and they are not able to compete with other exchanges on a global basis.

''SEBI has recently initiated a policy for simplifying the procedure for listed companies to tap the domestic markets with follow on equity offerings so that the regulatory arbitrage which currently drive the GDR/ADR markets is eliminated,'' ASSOCHAM President Anil K Agarwal said.

Moreover, there is a need for the Indian stock exchanges to become more efficient in order to make domestic companies change their current preference for overseas listing, he added.

Mr Agarwal said that allowing FDI in some segments of Indian finance including banking, insurance, mutual funds, investment banking, broking and commodity exchanges has brought in positive developments in the realm of products and processes in the respective segments and it is reasonable to assume that stock exchanges too will benefit from FDI.

''A clear policy direction from the government regarding classes of investors that can be brought into the stock exchanges, specially with regard to FDI, would help not only the stock exchanges who are currently in the process of demutualisation to achieve the desired results, but also lend a long-term dynamism to the capital markets in the global perspective,'' Mr Agarwal opined.

The paper also added that the investors in the stock exchanges include a wide range of institutions and several of these investors hold shareholding in a number of stock exchanges.

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