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Manmohan Singh calls for better regulation
Former Finance Minister Manmohan Singh said certain well-run PSUs should divest their equity to the public on attractive terms to break the vicious circle of low confidence in the primary market. Presiding over a seminar on capital markets in Delhi on Tuesday, he said further reforms in the capital market should top the agenda of the BJP-led coalition. Referring to the green signal shown by SEBI on the introduction of derivatives trading, Singh said the market should have a good mix of both hedgers and speculators. However, before introduction of the new risk cover instruments, the stock markets should have adequate infrastructure and regulatory system of the underlying cash market. Singh attributed the low confidence in the market to the lack of quality paper. Issuers of shares and merchant bankers misused the freedom given to them after abolition of the controller of capital issues. He said since the government could not go back to the controls of capital issues, they must find ways of improving the regulatory mechanism. He said this should either prohibit or regulate several hundred companies which mobilised money from the public and then disappeared. He called for a system of rating for the merchant bankers so that quality paper could be ensured for the investing public. Singh expressed concern over the bubble factor in the Indian stock market which even overrode the economic fundamentals, thus affecting the allocative resource efficiency.