New products needed to mitigate capital market risk: Sundaresan

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The risk appetite of the investors differ so it is very important for the market regulator to come out with newer products from time to time to cater to them, VS Sundaresan, Executive Director, Securities and Exchange Board of India (SEBI) said. He made this observation at the launch of new products at the virtual event - Indian Capital Market @US5$Trillion Mark - The Way Forward organized by The Associated Chambers of Commerce and Industry (ASSOCHAM).

Sundaresan said India has a higher percentage of the younger population as compared to people from other countries. “There is a need to create an ecosystem with a robust enforcement system leveraged by technology,” he said. With the launch of the Gold Spot exchange, India has an opportunity to become a price setter. “With the launch of this Gold Spot Exchange, there will be an opportunity to offer both spot gold and the electronic gold receipts to be traded on the exchange as securities,” he said.

Capital Markets Must Offer New Products To Mitigate Risk: ED, SEBI
Other new products like the innovators' growth platform (IGP) and the introduction of options on commodities will help mitigate risk among a different class of investors. “Non-profit organizations would be able to raise capital for their ventures through the Social stock exchange which is yet another new product,” he said. About the uniform security market code, Sundaresan stated that removing the provisions which are not useful, will really be helpful for the ease of doing business.

The market regulator is also working on different kinds of concepts for the benefit of the capital market. “Things like controlling shareholders with a different type of share voting pattern will help in raising money by selling stake but not losing control. The percentage needs to be significant even if not a majority to become a controlling stakeholder,” he said.

SC Aggarwal, CMD, SMC Global Securities Ltd said that it took around 60 years for India to reach a figure of $1 trillion, 12 years to reach another $1 trillion, and just 5 years to reach the next $1 trillion. “So we should expect 3-4 years to reach the figure of $5 trillion due to several factors like the PLI schemes. However we need to put a lot of emphasis on getting the infrastructure in place,” he said.

Arun Raste, MD & CEO, NCDEX stated that a comparison of the US economy and its capital market capital shows a difference of around 198 per cent while that of India is just around 104 per cent. “There is a huge potential which can be tapped,” he said. The share of agriculture is growing in India’s GDP. “From a 16- 17 per cent, Agriculture’s share has grown to 20 per cent with a 3.4 per cent growth even during the pandemic. It was mostly the government spending in agriculture which was spearheading the growth,” he said.

Neeraj Kulshrestha, Chief Regulatory Officer, BSE Ltd stated that for the development of the capital markets, there is a need to further push reforms. “There is a need to push for faster clearances. To set up a power unit, one needs to get almost 90 different kinds of clearances,” he said, adding financial aspects like taxes and interest rates need stability. 

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