Major hits and misses for the markets from the last Union budget
The last Union budget announced some key measures in taxation, public float in listed companies, and innovative trading platforms. However, the big shocker was the surcharge on foreign portfolio investors (FPIs), prompting many investors to pull out of India. It took a significant corporate tax rate cut for the tide to turn, and FPI inflows as of December crossed ₹1.3 trillion, including ₹97,250 crore in equities, the highest in the last six years.
Union finance minister Nirmala Sitharaman announced that the Securities and Exchange Board of India (Sebi) will increase the public float for listed companies to 35% from the existing 25%. Soon after, the Sensex fell. A year later, the proposal has not made headway with the regulator and its primary markets committee. After a Sebi board meeting on 21 August, chairman Ajay Tyagi said there were several issues with the proposal, including excessive liquidity and a dull public offers markets.
Other issues include potential flight of capital and the inability of state-owned companies to raise public float to even 25%. Sebi’s primary markets committee is yet to reach a consensus on the issue and the regulator has communicated its reservations to the finance ministry. The 2019-20 budget proposed a social stock exchange and a transparent electronic fund-raising platform for organisations working on social welfare. “It is time to take our capital markets closer to the masses and meet various social welfare objectives related to inclusive growth and financial inclusion,” said Sitharaman. Since then, Sebi has formed a high-level panel to draft proposed norms. The exchange is expected to work similar to the Institutional Trading Platform (ITP). A major concern is how these social organizations will be valued because of the lack of uniform parameters, said a regulatory official. As of now, this one also seems to be on the back-burner.
To raise retail investments in treasury bills and government securities, the budget proposed institutional development through interoperability of Reserve Bank of India (RBI) managed depositories and Sebi depositories. This would have resulted in seamless transfer of T-bills and government securities between RBI and depository ledgers. Since then, Sebi has successfully implemented interoperability for its regulated clearing corporations, thus enabling orders of BSE, NSE and MSE to be cleared through any clearing corporation. However, there has been no development on enabling interoperability across the two regulators supervised depositories.
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