Erosion-Hit Market Seeks Succour, Return Of 80m

So worrying is the situation that the capital market is urgently pressing the government for some measures to breathe life back into the markets.

At least six to seven major steps are being called for by the capital market to provide a measure of relief. Some of these suggestions have already been put forward to the finance ministry.

According to BSE president M G Damani, the decisions would essentially entail reversing some of the earlier decisions which have proved to be wrong.

To start with, the capital market is seeking a return of the exemption under section 80CC of the Income Tax Act, which allows a tax break on primary market subscriptions.

 

This would boost sentiment considerably, it is felt. Section 80M, which deals with investments by corporates in Unit Trust of India units and tax breaks to such investments is also being sought to be brought back, market experts say.

The market is also seeking canalisation of provident fund monies into the capital market by way of investments through the mutual fund route.

Says Damani:``Special funds can be launched by UTI, SBI, and others with a good track record like the Birla and Tata mutual funds to channel the provident fund money into the market.''

All new accretions, the experts suggest, can be channelled partly in the debt segment and partly in fundamentally sound stocks, the market experts say.

With an incremental flow to the tune of Rs 15,000 crore, this should adequately boost the markets, it is felt. ``These should be `no load' funds, as that would take care of the 6 per cent discount factor,'' the BSE president told Business Standard.

The Life Insurance Corporation can also be asked to increase its investment in equity from the present 4 per cent, since the claims ratio has turned favourable for it in view of the higher longevity.

The General Insurance Corporation should also be asked to do the same, the experts suggest, saying that both LIC and GIC can utilise their own mutual funds for the purpose.

Besides, the market is also pressing for making the reverse of section 54 E of the Income Tax Act also possible, that is, allowing a tax break when sales proceeds of idle assets are invested in productive assets.

According to Damani, the Budget this year has shown up a figure of net revenue income (net of diversion to states) of Rs 74,000 crore for 1995-96.

The revised estimate is to the tune of Rs 81,000 crore and the estimate for 1996-97 Rs 97,000 crore.

Damani says the Rs 7,000 crore additional revenue income last year was made possible by a 12 per cent industrial growth, but this year's estimate of an additional Rs 16,000 crore would be very difficult, since growth in April was only 7.7 per cent and April to June was less than 7 per cent. ``Only by reviving the markets can this be achieved,'' Damani said.

He says in that situation, the GDR markets would no longer remain as attractive and the domestic market itself would become lucrative once again.!-- #include virtual="/incs/right.asp"-->