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Shake up comatose primary market

Prithvi Haldea 

The primary market has been comatose. With expectancy of the economy regaining its right course, the secondary market has already shown buoyancy. Typically, if both sustain, the primary market will get kick-started. The new government should take the lead in this regard.

Divestment should be pursued aggressively. The target should be to bring down government stake to 51 per cent in all listed PSUs and, in the interim, mandating them to have 25 per cent public shareholding, similar to the private sector. Divestment should be targeted at small investors. For listed PSUs, only retail offerings should be made at a significant discount to market price. For unlisted PSUs, 25 per cent should be offered to institutional investors for price discovery and 75 per cent to retail investors at a high discount. Discounts only mean public wealth being shared with the public, and this shall also be politically expedient.

RGESS should be scrapped as it is badly structured, with focus on trading instead of capital formation, and is valid only for brand new investors. A new tax-saving scheme should be launched for investments into IPOs, PSU divestments and mutual funds. A special new scheme focused on young India (YES: Young-India Equity Scheme) should also be considered.

As mutual funds are the right vehicles for the small saver, the tax arbitrage on money market instruments should be done away with so that the funds concentrate only on small investors, their raison d'etre.

Other areas to look at are discouraging foreign listing by Indian unlisted companies, mandating EPFO to invest at least five per cent of the existing corpus and 15 per cent of new accretions into equities, energising the corporate bond market, and launch of a national financial literacy mission. The Sebi Ordinance should be turned into an Act on priority.


Prithvi Haldea
Founder-Chairman, PRIME Database

First Published: Wed, May 21 2014. 22:44 IST
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