'Debt market needs more attention'

NEW DELHI: Consolidation of regulatory powers, introduction of more products, reduction of trade cycle time, deepening of debt market, dematerialisation of all securities and focus on investor protection are the key recommendations of FICCI-Ernst & Young report for a broader, deeper and more efficient Indian securities market.

The section of the market that needs maximum attention currently is the debt market, the report says. The initial focus could be to create the market infrastructure as seen in the equity side of the market and then pushing the market players to increasingly use that market infrastructure, it says.

The reform and regulatory impetus in the debt markets require focus on investors, issuers, markets, and other regulatory norms. The study also stresses on the need to check volatility in the secondary market due to foreign portfolio flows.

“While the flows are on a rise, they have the potential of increasing volatility. The regulators would need to take steps to improve the stability of these flows and discourage speculative flows,” the report says. The report also highlights the need to regulate new investor classes such as private equity, hedge funds and soverign wealth funds.

Globally, regulators are taking a cautious approach towards adopting regulatory measures for new investor classes. These new investor classes are providing financial depth in the market as they continue to contribute more capital and foster innovation.

They are also facilitating price discovery processes in relatively less liquid sections of the market and are asking for better governance.

The regulatory quality in India in global comparison as indicated by the World Governance Index still needs improvement. A case in point is the UK, where the move towards a single regulator over the last two decades seems to have paid off. That is a model that India could consider adopting, says the report.