Prithvi Haldea,market analyst,in conversation with Subhomoy Bhattacharjee
How would you to list some of the main things Sebi has achieved in these 25 years?
I would say introduction of screen-based trading,with online order matching,has been one of the greatest successes. It has created a transparent system of price discovery that is so beneficial to investors. The best price for a scrip,both buy and sell,can now be obtained in milliseconds. If you add to that the reforms in the clearing and settlement system where all transactions are now paid for in T+2 days (against 3-6 weeks earlier),the foundation for an efficient market is set. Another major change in the market is the move away from the system of badla,the bane of the Indian market,to modern-day derivatives,in a transparent and efficient manner.
My other favourite is the transition to paperless shares. Dematerialisation has done away with the curse of forged/duplicate shares,the months it would take to transfer the shares post the purchase,and the problems associated with signatures not matching,torn certificates etc.
Sebi has also been able to improve the disclosure regime both at the IPO stage as well as the post-listing stage. Of course,now with bulky disclosures we might have gone the other extreme,but extra disclosures are better than no disclosures. The details of financial results,material developments,shareholding pattern make for a better discovery of price,which is what the stock market is all about.
What about major hiccups,the two topmost?
To me the weakest link in Sebis report card is the lack of success in curbing insider trading. This ill has now grown in size,and with sophistication. Shell companies and other multi-layered operations have made insider trading even more insidious. Sebi needs more powers,and a better investigative infrastructure,to curb this menace.
And mutual funds?
This worries me a lot. The mutual fund sector has not yet become the preferred option for small investors. While policies and regulations have not been supportive of growth,the industry too is to be blamed. Over the years,they have not focused on fair practices and investors interests. For example,each fund would keep launching NFOs and,through a huge incentivised distribution network,offload these on gullible investors on at par basis. Worse,the funds are more focused on corporates and banks for money market instruments.
On the other hand,Sebi has not been successful in convincing the government/EPFO to move at least a small part of their corpus into equities. This is the long-term money which has to come to the markets,like it is the world over. Lack of deep domestic institutions has made us unfortunately an FII-dependent market.
Haldea is chairman and managing director of Prime Database