Formula-Based Issue Pricing Urged

He feels that free pricing with few controls and regulations should be allowed to prop up the depressed capital market. "Companies should be directed to decide the price as per the erstwhile Controller of Capital Issues (CCI) formula. But if the price is higher than it deserves as per the CCI formula, the prospectus should be directed to the Securities & Exchange Board of India (Sebi) to vet the proposal," said Mayya.

Mayya was addressing a seminar on 'Capital Market ---Problems and Prospects' organised by the Bengal National Chamber of Commerce & Industry in Calcutta yesterday.

Moreover, the 'safety net', which was proposed by Sebi and later faced opposition by merchant bankers, is essential to boost the primary market, Mayya said.

 

The downward trend in the primary market, which was witnessed in 1995-96, persisted in the next year.

The amount of capital raised through new issues declined from Rs 14,151.1 crore in April-December 1995 to Rs 10,369.21 crore in April-December 1996.

Besides, investor education to create an awareness among investors of their rights and obligations, coupled with periodical training of brokers is a must, added Mayya.

Both Mayya and Nitish Sengupta, director-general, International Management Institute, feel that futures and options should be introduced with certain restrictions to suit the changing needs of the market. Sengupta said that the G S Patel Committee's recommendations on the revival of forward trading should be implemented without any modifications to revive the capital market.

Samarendra P Saha, president, Bengal National Chamber of Commerce & Industry, acknowledged the United States Agency for International Development's efforts to establish the depository system, strengthen the regulatory and enforcement capacity of Sebi, develop stock exchanges and associations of various securities market intermediaries into self-regulatory organisations.

He also lauded the agency's efforts to promote futures and options markets to help institutional investors with risk management, develop the mutual fund industry to mobilise savings of retail investors for investment in corporate and infrastructure sectors, and to bring Indian securities market closer to international standards of regulation.

Vivek Mahajan, committee member, Calcutta Stock Exchange(CSE), announced the bourse's intentions to capitalise on its areas of strength to woo investors to the local bourse which was one of the second largest exchanges in the country after the Bombay Stock Exchange.

"Speculation in the exchange provides liquidity to the market which is essential to gain an edge over other exchanges including the National Stock Exchange and the Bombay Stock Exchange", said Mahajan.

The exchange is also considering the proposal to form market-makers of high networth investors who can provide a two-way quote, and provide for a 'timeless trading zone' where information would not affect order flows.

Mayya feels that free pricing with few controls and regulations should be allowed to prop up the depressed capital market