The Hindu : View markets with equanimity, says Bajpai

Online edition of India's National Newspaper
Saturday, Jan 10, 2004

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Business

View markets with equanimity, says Bajpai

By C. R. L. Narasimhan

The Hindu met G. N. Bajpai, Chairman of Securities and Exchange Board of India, in Mumbai on January 8 barely minutes before the unexpected market boosting fiscal concessions became public. The markets were already on fire and on Friday the expectation that the technology companies led by Infosys would (through their quarterly results) further contribute to the bullishness has not been belied.

The SEBI Chairman, who is at the helm of capital market regulation at a time when the markets have never before exuded such optimism, is a good communicator as his comments on the following topical issues show.

QUESTION: A question to be entirely expected in the circumstances: Are you concerned over the level of indices?

ANSWER: I have said this before, as a regulator I have no comfort or discomfort over the level of the market. The comfort or discomfort is on the movement — whether the movements are in lines of expectations. If there are unusual movements they become a matter of concern. I have made a statement that I am worried over the sharpness of the rise. It is not my call but the call of the investors, the economists and the analysts as to what should be the level of the market. That is because the market has a relationship to the economic fundamentals both macro and micro. I will not take a judgment call on that. My concern as a regulator has been and will always be whether the movements are on their path. If they are unusual I become cautious.

Do you have the mechanism to spot those movements? Can you exercise those freely?

Well I can't say that we have all the mechanisms but we do have a number of them in place. Certainly the regulator has the gut feeling to decide on what is happening. As for being able to exercise (the regulatory powers), I can categorically say that I have no impediments whatsoever. In fact I have demonstrated this freely through my actions.

I can state very clearly that we in the SEBI are working as an autonomous independent body. All our judgements are based on facts and data.

Since the regulatory body has to tackle several issues of the capital market simultaneously the literature on the subject is growing by the day. In that context and keeping in view the need to disseminate information to the public at large, would you attempt a codification of the circulars/instructions for say a topic such as insider trading?

As far as regulation is concerned the present and previous generation rules and regulations are available on the website. Now we are also publishing every month a SEBI bullettin, which has a com- prehensive coverage of regulation as well as market data. I would strongly urge all those connected with the stock markets to refer to this publication.

The SEBI has recently decided to ask all listed companies to ensure that there is public float of at least 25 per cent. Promoters, whose holding exceeds that, will be asked to offload a portion to bring the shareholding pattern in conformity with the new proposals. This proposal, like many new ones, has its critics?

This move like all recent SEBI initiatives fits into a pattern. We have brought about a high level of transparency in the regulation. One of the steps in that direction is that whoever we contemplate a change in any regulation, we not only take the views of an expert committee but put those views on the website for the world at large to comment. We prepare a note with a tabular column indicating (a) the existing regulation; (b) the expert committee's recommendations; (c) the public reactions; (d) the views of the SEBI management; and (e) the board's decision. After this we prepare the draft regulation, which is also put on the website and undergoes the same process (as the recommendations) before it is finalised. The SEBI has a number of expert committees that vet the entire gamut of legislation pertaining to regulation. We have the Legal Affairs Committee headed by no less a person than Justice M. N. Venkatachaliah.

The question of the quantum of promoters' shareholding will also be referred to the committee. I am however of the view that there should be a certain minimum float. Any company using national wealth must allow a sharing (of such wealth) by a wider section. Second, it is in the interests of the company to have a larger float. It can improve corporate governance and minimise the chances of manipulating the share prices.

Of course we will provide all opportunities to the companies and the promoter groups so affected. Besides, there will be a three-year lead period before the new rule takes effect.

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