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Capital Market in India

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 CHAPTER 8

MAJOR AREAS OF IMPROVEMENT AND

SPECIFIC POLICY PROGRAMMES AND SUGGESTIONS

8.1 Introduction

This chapter gives the synthesis of the whole study. After considering the objectives
and the historical evolution, it would be proper to give constructive suggestions
regarding the problems being faced and those that may emerge prospectively. The
policy and specific programmes to promote the capital market as a tool to convert
savings into investment are chalked out in this concluding chapter. This chapter has
been broadly divided into two parts viz. conclusions based on the present study and
specific policy programmes, suggestions and areas of improvement in the capital
markets. Though the present study is a humble attempt to bring out evolution of
capital markets in India, an attention has also been given to specifically provide
constructive suggestions to further promote and develop the capital markets in India.

8.2 Conclusions

8.2.1 Growth and Structure of Capital Markets and their Functioning in India :
The history of capital markets in India dates back to almost 200 years. Indian capital
markets are one of the oldest markets in Asia as well as in the world. There are
instances in the early nineteenth century which tell us about the presence of capital
market in India. In 1830’s business on corporate stocks and shares in bank and cotton
presses took place in Mumbai. It started with only six brokers and a few entities like
banks and cotton presses who traded among themselves in loan securities which laid
the foundation of trading in stocks. During these days, East India Company was
dominant in Indian market. As the time progressed, the trading was also affected by
some external events like World War I and II, American Civil War etc. As the British
Empire was ruling India, the direct and indirect effects of the developments: political
as well as economical, were also observed in Indian markets. The most popular stock
1
exchange in India i.e. BSE was initiated as an association of brokers in 1887. The
‘Jijibhoy Tower’ which is popularly indicated as ‘heart of Indian financial market’
was formally inaugurated in the year 1899. Afterwards the cities like Ahmadabad,
Kolkata, Delhi also had stock exchanges. But the real momentum in these stock
exchanges was observed after India’s independence i.e. after 1947. Relatively smaller
cities like Cochin, Pune, Jaipur, Patna, Rajkot, Guwahati also had the stock exchanges
which were established after the independence. After independence i.e. 1947 in Indian
capital markets, an element of speculation crept into the market. Increased cost of
public issues and isolated nature of stock exchanges were the other problems which
emerged in the post –independence phase.(Table No.2.1 and 5.8)

8.2.2 Trading System in the Indian Capital Markets

Broadly the capital markets are divided into two classes primary and secondary. The
primary market is also known as new issue market which actually mobilizes savings
into investment. This facilitates capital formation for the economy as a whole. On the
other hand, the secondary market provides liquidity to investors. Investors can enter
and exit in the capital market at any point of time according to their requirements. The
capital markets in India have some characteristic features which make them unique.
Like any other market in the world, the Indian capital markets help in promotion of
industrial growth by raising long term capital. The various entities in the market
provide a variety of services and products. Recently, the capital markets are also
benefited from the development of mutual fund and insurance industries in India as
ultimately domestic mutual funds and insurance companies also invest their funds in
the capital market.

By the year 1991, there were 20 stock exchanges in India. The New Economic policy
brought some more momentum for this development. The two major establishments
viz. NSE and SEBI are the products which emerged during the post-reform phase i.e.
after 1991. There has also been a sea-change in the trading pattern in the stock
exchanges. When these developments were taking place in India, the world capital
markets were also progressing. Though Indian markets are not as developed as those
of the Europe and the America, still the technology and variety of products in Indian
2
markets are able to make themselves at par and comparable with world financial
markets.

After the inception of financial sector reforms in the Indian capital market, there has
been improvement in the technology which is being used in the trading. Use of
internet, screen based trading system, emergence of NSE; online trading are some of
the highlights which have changed the nature of trading. The faster settlement,
increased market efficiency and adequate regulations also support the trading in the
market. (Figure 5.1)

8.2.3 Technical Analysis for Investment Decision Makring

On the other hand, there is a ‘technical analysis’. This analysis studies the various
factors like business cycles, general economic condition, political stability, volatility
etc. which have impact on the functioning of stock exchanges. There are few theories
like Dow Theory, Elliot Wave Theory as well as some techniques like charts,
averages, volumes on the basis of which, the trends in the markets can be observed.
On the basis of careful study of these facts and figures, the investors can be benefited
as they can get the reliable information on the basis of which their own investment
decisions can be formed.(Figure 5.6 to 5.14)

8.2.4 Constraints in Smooth Functioning of the Capital Markets

Throughout the various phases of development, the capital markets in India have
experienced some problems and bottlenecks. These problems proved to be hindrances
in the development of capital markets in India. In the initial phase of development of
capital markets, unorganized nature of the market and poor public response were the
important problems. Since it was just the beginning of the capital market, the structure
was not organized. Since there were only few stock exchanges, the response from the
people towards these exchanges was also poor. During the pre-independence period,
the problems of wasteful procedures and possibility of manipulation were developed.
The problem of liquidity was also developed during this phase. Due to cumbersome
procedures involved in the functioning of capital markets, some brokers tried to
manipulate the trade. As these brokers dominated the market, they tried to manipulate
3
the trade in the stock markets. Since the penetration of stock exchanges was low
during this phase, the public outreach was limited and hence the problem of liquidity
was also developed at this time.

Gradually some other problems were also experienced in the market. As the market
penetration was increasing, some inherent problems which emerged in the 1970’s and
1980’s were lack of protection to the investors, open outcry and unorganized trading
structure, delay in settlements etc. As the number of players in the market increased
the open outcry became the feature of the market as the trading system was not
organized.

In the post liberalization phase, some of the scams which had a huge impact on the
investors’ mindset were experienced. This was particularly because of speculative
motive in trading. At the same time, lack of liquidity and volatility also emerged as the
biggest problems in the Indian capital market. Even today, these problems persist in
the market. The drawback which is emerged out of these problems is that the small
and genuine investors tried to be aloof from the market. Apart from these problems,
price rigging, lack of transparency, rumours, dominance of big corporate and FIIs have
also been observed as the problems which proved to be hindrances in the development
of capital markets.

At the same time the Indian capital markets are dominated by some big corporate
houses and foreign institutional investors. As these players in the market have huge
funds, they are in a position to drive the market in positive as well as negative
direction. Another area of concern for Indian Capital market is the volatility. Due to
the possibility of international flow of capital from one country to another country in
an easier way, it has been observed that the few FIIs and big corporates are frequently
engaged in changing their portfolios and destinations. This increases volatility in the
market. Due to this problem small and retail investors try to be aloof from the market.
This restricts the presence of small and ‘genuine investors’∗ and ultimately, clear the

The term ‘genuine investors’ refers to the investors who invest their funds for long term. In a real
sense, only long term investment results into capital formation. The investors with short term horizon
have speculative motive which may not result in capital formation for which capital markets exist.
Therefore, hereinafter, the term ‘genuine investors’ has been used to denote investors making
4
way for speculators, who make the market unstable for achieving short term gains
from the market.(6.2 to 6.6)

8.2.5 Regulatory Mechanism for Capital Markets in India

In order to minimize the risks involved in the markets, SEBI has been very
instrumental as a regulatory authority. SEBI has come out with a number of guidelines
on various issues. Some important steps taken by SEBI include establishment of
grievance redressal cells at the stock exchanges, conducting investor awareness
programmes, use of technology in the market. These steps taken by SEBI have
facilitated generation of confidence among the small and genuine investors. Due to the
advancements in technology, now the geographical barriers have been removed and
the user friendly technology is being adopted in the Indian capital markets.

As far as the research in capital market in India is concerned, a very little attention has
been given by the researchers on this particular issue. Most of the research studies in
capital market focus on the trading, volatility and corporate behaviour in the capital
market. But as regards the developments, regulatory authorities and small investors,
there has been very limited research in India. Some of these studies have been briefly
referred in the previous chapters.

The investors’ decision making is largely dominated by the advice given by brokers;
consultants etc. But still there are some techniques which justify the behaviour of
prices in the market. On the one hand there is fundamental analysis which tells about
the performance of company, industry and economy as a whole. The various
techniques used in fundamental analysis include ratio analysis, trend analysis,
comparative financial statement analysis etc. This helps to understand the earnings,
liquidity, solvency and turnover of the company and gives an insight about its
performance over a period of time.

During this phase itself, SEBI emerged as a regulatory authority in Indian financial
markets. It tried to come out with various guidelines and regulations to regulate the
market, but there were number of legislations governing the capital markets in India.
investment in the market with long term horizon.
5
The Companies Act, Capital Issues (Control) Act, SEBI Act, Securities Contracts
(Regulation) Act were operative. Later on Depositories Act was also enacted. But the
problem of multiple regulations was overcome by giving more powers to SEBI and
vesting authority to the SEBI as an apex body in regulating the Indian financial
markets.

Initially the regulations announced by SEBI were reactive in nature i.e. some scams
occurred and then regulations were given to avoid such scams. But again some another
scam took place which made the authorities to again issue some regulations in this
regard. In this respect, the SEBI was reactive, but after being given more
responsibility and independent authority, SEBI has now become pro-active and is
satisfactorily regulating the capital markets in India.(Table No.7.2)

After emergence of SEBI, there has been tremendous increase in the number of
intermediaries registered, amount of capital generated, new issues in the market etc.
Another important feature of functioning of SEBI is the grievance redressal system.
Due to this redressal, the small and genuine investors have found some faith in the
market which is a good sign for healthy capital market. Apart from this, SEBI’s
emergence also helped in faster settlements in the markets. Due to permission given to
online trading and screen based trading system and use of technology in governing
these trades, there has been an increase in transparency in the transactions taking place
in the stock exchanges. From time to time, there have been lot of committees
constituted by the SEBI to provide recommendations on various issues related to the
regulation, promotion and development of capital markets in India. Some of the
important committees were Justice P.N. Bhagwati Committee on Takeovers, Dr.Bimal
Jalan Committee on Ownership Structure of Stock Exchanges, Gehrotra Committee on
Internet Based Securities Trading and Services, Y.H. Malegam Committee on
Accounting Standards, Kumar Mangalam Birla Committee on Corporate Governance,
Justice Khania Committee on Corporatization and Demutualization of Stock
Exchanges. The recommendations given by these committees were mostly accepted
and SEBI has introduced regulations, guidelines on various issues on the basis of
recommendations of such committees.

6
Govil Shiva K1 has argued that the markets for securities are well developed inspite of
the problems like speculation, liquidity etc.

M.R. Mayya 2 asserted that the functioning of stock markets in India is safe with the
functioning of clearing corporations and faster settlements.

Rakesh Mohan3 has expressed that the development of financial markets is an ongoing
process and there is still some time to go before the markets are fully developed and
integrated.

Dr. Man Mohan Singh4 had specified the scope and powers to be given to SEBI as an
independent regulatory authority in the Indian capital market.

C.B. Bhave5 underlined the scope for attracting the household saving into the capital
market, which is possible with the help of investor education programme.

G.K. Mehta6 stated that speculation and forward trading are the evils in the capital
market and they have to be eliminated for healthy capital markets.

J. K. Karnik7 emphasised the significance of stock exchanges in the capital markets

and further stressed that liquidity, investors’ protection, information system should be
improved.

Kirit Somaiyya 8 has observed that SEBI needs some more work to do in the areas of
investor education and grievance redressal system. He further stated that in order to
achieve a sustainable and healthy growth rate, the strong capital market is necessary.

L.M. Bhole9 has concluded that capital market helps to align the interests of the
managers and owners and thereby facilitates efficient resource allocation and growth.

In the development of the financial sector, the role of capital market is significant. It is
obvious that capital market development has a strong impact on the economic
development of the nation. In India, there has been significant increase in the number
of companies as well as capital raised by these companies especially after
independence. The pace of growth in savings is also satisfactory. The rate of savings
to GDP was 8.9 % in 1950-51 which rose to 32.5 % in 2008-09. At the same time,
7
private capital issues also increased significantly. The composition of debt and equity
in the capital structure of the company has also shown more reliance on equity by the
corporates. The number of stock exchanges increased especially after 1980. But
recently, some stock exchanges have been derecognized and today, we have 19 stock
exchanges in India. The share owning population in India has also shown a remarkable
increase from just 4 Lakhs in 1950’s to 190 Lakhs in the year 2000. Thus, in the global
markets also, there has been respect for the Indian Capital market. The two premiere
stock exchanges in India: BSE and NSE are among the top 10 stock exchange
throughout the world. Therefore recently, there has been lot of investment by FIIs in
Indian markets. In the year 1992-93 this investment by FIIs was Rs.4.27 Crores which
sharply reached to Rs. 97,863 Crores in the year 2008-09. But the returns from Indian
equity markets (nominal as well as real) have not been consistent. There are lot of
fluctuations in the percentage of returns. The forces in the international market have
also impact on Indian capital market and hence these returns also participate in the
global market sentiments.

8.2.6 The Indian Capital Markets and Economic Development in Pre and Post
Independence Era

Table No. 8.1 given below throws light on some evidence from pre and post
independence era with reference to the economic development vis-à-vis capital
markets in India. One of the factors of economic development is capital formation.
The capital formation through the capital market indicates the support of the market to
economic development of a nation.

Table No. 8.1

Capital Markets and Economic Development: Pre and Post Independence Era
Year Paid up Capital Industrial GDP
(Rs.Crores) (Rs. Crores)*

1915-19 0.50 (Please refer the

note below)
1920-24 1.80

Pre Independence 1925-29 0.70

8
Era 1930-34 0.90

1935-39 1.20

1940-47 1.40

1948-52 8.20 1,283 (1950-52)

1952-57 229 7,189

1958-62 412 11,586

1963-67 364 19,947

1968-72 385 31,849

1973-77 422 62,061

Post Independence 1978-82 590 1,21,203
Era
1983-87 2,553 2,42,573

1988-92 3,374 4,77,564

1993-96 3,983 7,59,567

1997-2001 42,483 16,55,471

2002-05 47,998 19,81,346

2006-09 2,23,414 34,78,044

Source : The Department of Company Law Administration, Ministry of Finance, New Delhi

SEBI : Handbook of Statistics on Indian Capital Markets. , RBI : Annual Reports

Note : The figures relating to the industrial GDP are not available in respect of pre-
independence period as the First Report of the National Income Committee was
submitted in April, 1951. Before independence, few attempts were made to estimate
national income by Dadabhai Naoroji (1868), William Digby (1899), F.Shirras
(1911,1921 and 1931), Shah and Khambata (1921), V K R V Rao (1925-29 and 1931-
32) and R.C. Desai(1931-40). Most of these estimates were the results of the
individual efforts and therefore they suffered from serious limitations. These estimates
were based on some assumptions. Thus, the results for the same for pre independence
period were highly undependable.10

9
The process of capital formation in the underdeveloped countries (like India) depends
crucially on capital formationα. Once the level of capital formation is pushed up, it
exerts an interacting and cumulative effect on the economy of the country leading to a
growth in national income. Further, this growth in national income leads to economic
development. Thus, though capital formation is not the only indicator of economic
development of a nation, it has cumulative and interacting effect on the economy. The
table no. 8.1 explains the relation between paid up capital and GDP.

If the paid up capital and the industrial GDP is compared, it can be seen that there is
consistent increase in both: paid up capital as well as industrial GDP. Especially, the
years 1983-87 witnessed a huge increase in the paid up capital and industrial GDP
figures. Again, in the years 1997-2001 the similar increase was experienced in paid up
capital and industrial GDP. There is positive correlation between the paid up capital
and industrial GDP (0.59). Therefore, it can be concluded that increase in paid up
capital essentially would result into increase in the industrial GDP. It means that
increase in paid up capital ultimately facilitates industrial development through
increased output.

From Table No. 8.1, it is evident that there has been a consistent growth in the number
of companies formed as well as capital formation by these companies. Before 1915,
the relative growth was too low, therefore, if pre independence period (1915-1947) is
compared with a period of just 4 years after independence (1948-52), one can easily
come to a conclusion that capital formation during post independence period is much
more significant than that in pre independence period. From 1915-1947, there were
4605 companies newly formed and resulted into a capital formation of Rs. 6.50
Crores. Immediately after independence, within the next four years only, 2582
companies were newly formed and resulted in capital formation of Rs. 8.20 Crores.
This phenomenon clearly indicates that capital formation got momentum after
independence and further, this was one of the signs of economic development of the
country. The capital formation in first half decade after independence was much more

α
Misra S K and Puri V K - “Economics of Development and Planning – Theory and Practice”, Himalaya
Publishing House, Mumbai, 8th Revised Edition, 1999, pp.426
10
than the capital formation of the three decades of pre independence era. This proves
the first hypothesis set for the study (Appendix A – 1)

The process of economic development depends to a significant extent on capital

formation β. A higher rate of capital formation would enable the economy to produce a
larger volume of goods resulting in an increase in national output and employment
which are the signs of economic development.

8.2.7 The Capital Market in India and the Rural Economy

It is, in general, argued that the growth of capital market has not significantly helped
the rural economy. There are signs of low capital formation in agriculture and rural
area. Therefore, commonly, the people argue that there is no direct relation of capital
market in India and the rural economy of the country. The following two tables
emphasise the fact that rural economy and investment and development of capital
market do not have direct relation with each other.

Table no. 8.2 Proportion of Urban and Rural Investors in Capital Market

Segment % of Investors

All India 7.41

Urban 15.20

Rural 4.22

Source : Handbook of Statistics on Indian Securities Market, 2009, pp.223

The Table No. 8.2 gives a proportion or percent of total investors in the country as
well as proportion of rural and urban investors in the country’s capital markets. At the
national level, there are only 7.41 % people in the country who are investors in the
capital market. But an interesting observation is that there is disparity in urban and
rural investors. Though a total of 7.41 % investors are there, only 4.22 % of the rural
people are investors in real sense. But in urban areas, the same percentage is 15.20 %.

β
Misra S K and Puri V K - “Economics of Development and Planning – Theory and Practice”, Himalaya
Publishing House, Mumbai, 8th Revised Edition, 1999, pp.347
11
It means that rural economy is not well connected with the Indian capital market as the
proportion of investors in the rural segment is too low as compared to that of urban.

Table No. 8.3 Investor Households by type of Investment (No. in Crores)

Segment Equity Equity+ Debentures Total

All India 0.4 0.3 0.7

Urban 0.3 0.2 0.5

Rural 0.1 0.1 0.2

Source: SEBI, NCAER Survey, March, 2003

From Table No. 8.3, it can be observed that, out of the total equity investors of the
country, only 25 % comprise of rural area while 75 % of investors come from urban
background. But in case of equity and debt together, almost 33 % of investors are from
rural area. Similarly, the total investor households have 28 % rural households and 72
% urban households. From this table, it is evident that rural economy is not well
connected to the equity markets. While the population of the country has more
weithage in rural areas, regarding investors population, rural population is away from
the markets. This is because of some rigid procedures, low accessibility and fear about
market and a general ignorance of capital market working. This proves the third
hypothesis set for the study (Appendix A – 3)

8.2.9 The Indian Capital Markets and Agriculture

Agriculture, since ancient times, is known as the backbone of Indian economy. In the
past, agriculture led the economic development, but now the growth of industry and
service sector caused agriculture to take a backseat. Since last two decades, due to the
growth of service sector, agriculture has lost the significance as far as its contribution
to GDP is concerned. During the same time, the capital markets in India also got their
momentum due to opening of the economy. It was natural at this juncture that most of
12
the investment and capital formation goes to the industry and service sector. Following
table clarifies this fact.

Table No. 8.4 Sectoral GDP Growth Rates and Investment Growth Rate

Investment Growth Rate GDP Growth Rate

through Capital market

Agriculture 3.7 0.4

Manufacturing 34.8 8.3

Services 12.3 9.7

Source: - Handbook of Statistics, 2011, RBI

From this table, it is clear that the capital markets have grossly ignored the agricultural
sector. More and more investment is attracted by the manufacturing and service sector.
The reason for this phenomenon is the higher growth rate of manufacturing and
service sectors. These sectors have generated more returns to the investors and they
represent profitability of sectors/industries. On the other hand, due to several reasons,
productivity in agriculture has declined which has resulted in low growth in
agricultural sector and hence due to the less possibility of generating profits and
thereby creating wealth, agriculture has been neglected by the capital markets.

Following table further supports this statement.

Table No. 8.5

Composition of Gross Capital Formation (Sectoral)

Sectors % of Capital Formation

Gross Capital Formation in Agriculture 2.97

Gross Capital Formation in Industry 43.80

Gross Capital Formation in Services 53.23

Source: - Economic Survey, 2011

13
Table No.8.5 also stresses the fact that in gross capital formation also agriculture has
been neglected. On the contrary, services sector has been given more significance in
capital formation. The capital formation is one of the important indicators of economic
development. Thus, it can be clear that in economic development, agriculture has
taken a backseat while service sector gives more contribution. This proves the fourth
hypothesis set for the study (Appendix A – 4)

8.2.10 Public Sector Development and Growth of Indian Capital market.

The Indian capital markets have observed growth especially in the last two decades or
so. But it is important to know whether the public sector, which has been dominant
since past, has some role in growth of capital markets in India. The capital markets
helped both public and private sector undertakings to raise the capital. The following
table gives an idea about sector wise capital formation.

Table no. 8.6

Sectorwise Capital Formation (Amount Rs. Crores)

Private Total Capital GDP Income

Sector Public Sector Formation (Rs.Crores) Elasticity
Capital Capital (Private and of Capital
Formation Formation Public Sector)
Year (Rs.Crores) (Rs.Crores) (Rs.Crores)
1950-51 227 294 521 -
1951-52 265 342 607 20135 -
45.95
1952-53 88 296 384 19974
-0.91
1953-54 16 337 353 21746
-15.94
1954-55 161 508 669 20525
9.91
1955-56 232 563 795 20915
2.06
1956-57 363 738 1101 24823
8.32
1957-58 423 908 1331 25446
-1.09
1958-59 264 898 1162 28403
14
 2.69
1959-60 325 1000 1325 29882
4.02
1960-61 572 1259 1831 32720
2.37
1961-62 794 1272 2066 34494
0.68
1962-63 579 1590 2169 37018
2.03
1963-64 933 1852 2785 42209
0.71
1964-65 964 2146 3110 49191
0.48
1965-66 745 2438 3183 51620
-0.34
1966-67 671 2366 3037 58615
0.78
1967-68 873 2570 3443 68689
-1.07
1968-69 821 2422 3243 72413
0.02
1969-70 721 2530 3251 79621
4.51
1970-71 1107 3104 4211 84836
2.53
1971-72 1282 3631 4913 90422
1.38
1972-73 1432 4152 5584 99388
1.13
1973-74 1757 5212 6969 121180
1.57
1974-75 2848 6083 8931 142867
2.80
1975-76 2344 8236 10580 152294
0.27
1976-77 1437 9360 10797 163976
0.28
1977-78 2530 8689 11219 186670
2.37
1978-79 2403 10805 13208 200635
2.43
1979-80 3263 12898 16161 219081
0.22
1980-81 3855 12994 16849 261201
1981-82 9760 18092 27852 1.80

15
 355797
-4.10
1982-83 10898 21543 32441 341501
-0.34
1983-84 7726 22810 30536 399834
2.09
1984-85 11048 27366 38414 449079
2.03
1985-86 15549 32063 47612 502005
1.20
1986-87 16901 37275 54176 559665
-0.63
1987-88 13282 36361 49643 634562
1.14
1988-89 17487 43137 60624 757802
1.12
1989-90 21215 49707 70922 872844
0.98
1990-91 25575 56874 82449 1017189
1.57
1991-92 40439 62052 102491 1174573
1.23
1992-93 52431 68533 120964 1347264
0.41
1993-94 53008 75923 128931 1565647
1.94
1994-95 76139 94775 170914 1828574
1.73
1995-96 123899 97749 221648 2143078
0.11
1996-97 122491 103159 225650 2494812
0.67
1997-98 134643 107830 242473 2772454
0.12
1998-99 124122 122849 246971 3198601
1.58
1999-2000 143475 144610 288085 3536197
-1.55
2000-01 109013 144638 253651 3809401
4151299 1.16
2001-02 123628 156537 280165
0.67
2002-03 145466 149399 294865 4476291
1.87
2003-04 188266 174479 362745 5027028
2004-05 338755 216962 555717 3.95
16
 5704395

2.14
2005-06 491983 271835 763818 6700891
1.46
2006-07 611044 329679 940723 7766241
2.84
2007-08 749894 429014 1178908 8458804
Source: SEBI : Handbook on Indian Securities Market(Various Issues) – For Capital
Formation and GDP. (Income Elasticity has been derived from these figures.)

From Table No. 8.6, it can be observed that both: private sector as well as public
sector have contributed in the capital formation. There has been consistent increase in
the amount of capital formation since last six decades. At the same time, private and
public sectors both have shown consistent increase in their capital formation. But
especially, after the year 1991, private sector capital formation has shown remarkable
increase. Thus, though there is consistent increase in private as well as public sector
capital formation, slightly, private sector has an edge over rate at which capital
formation in public sector is increasing. But only private sector has not been showing
growth in capital formation, but it is also accompanied by growth in capital formation
in public sector, thereby growth in total capital formation. This rejects the second
hypothesis set for the study (Appendix A – 2)

Income elasticity of capital formation derived from the above table shows that there is
very close association between the capital formation and GDP over the period of
almost last six decades. The average income elasticity for this period is 1.97. The
positive elasticity indicates that growth in capital formation is reflected in growth of
GDP over a period. The years 1953-54, 1954-55, 1958-59, 1966-67, 1968-69 and
1983-84 have given negative elasticity. The reason behind this fact is that, in those
years, the GDP has declined as compared to the respective last year while capital
formation shows an increasing trend as compared to the corresponding last year. In
the years 1982-83, 1987-88 and 2000-01, the capital formation has declined while
GDP has increased as compared with the respective last year which has also resulted
in negative elasticity. But except these few instances, in all the remaining years, there

17
is positive elasticity. It means that the GDP growth and capital formation go hand in
hand and there is definitely a positive impact of capital formation on GDP growth.

8.2.11 Foreign Investment and Indian Capital market

The year 1990 was a path breaking year in the history of Indian capital market as well
as in Indian economy as a whole. Before 1990, the foreign investment was not freely
permitted in India. After 1990, foreign investment was allowed in Indian market.

Table No. 8.7 Foreign Investment Inflows (Rs. Crore)

Year Direct Investment Portfolio Total

Investment

1990-91 174 (94.05) 11 (5.95) 185

1991-92 316 (96.93) 10 (3.07) 326

1992-93 965 (56.73) 748 (43.27) 1713

1993-94 1838 (14.11) 11188 (85.89) 13026

1994-95 4126 (25.57) 12007 (74.43) 16133

1995-96 7172 (43.52) 9192 (56.48) 16364

1996-97 10015 (45.99) 11758 (54.01) 21773

1997-98 13220 (66.05) 6794 (33.95) 20014

1998-99 10358 (102.54) -257 (-2.54) 10101

1999-2000 9338 (41.59) 13112 (58.41) 22450

2000-01 18406 (59.34) 12609 (40.66) 31015

2001-02 29235 (75.20) 9639 (24.80) 38874

2002-03 24367 (83.72) 4738 (16.28) 29105

2003-04 19860 (27.53) 52279 (72.47) 72139

2004-05 27188 (39.37) 41854 (60.63) 69042

2005-06 39674 (41.77) 55307 (58.23) 94981

2006-07 103367 (76.52) 31713 (23.48) 135080

18
2007-08 138276 (55.75) 109741 (44.25) 248017

2008-09 161536 (165.00) -63618 (-65.00) 97918

2009-10 176304 (53.45) 153511 (46.55) 329815

Figures in the bracket indicate percentage to total inflow.

Source:- www. rbi.org.in , Handbook on Indian Securities Market, SEBI, 2009 pp.53

The Table No. 8.7 states clearly that there is consistent increase in both direct
investment as well as portfolio investment as the element of foreign investment in
India. The direct investment (FDI) grew steadily over the last two decades. But in case
of portfolio investments, there are ups and downs over the last two decades. The
Compounded Annual Growth Rates (CAGR) in respect of Direct Investment is 43.94
% while CAGR in case of Portfolio investment is 65.25 %. While as regards the total
investment, CAGR is 48.29 %. Thus, though there is increasing trend in direct as well
as portfolio investment, foreign portfolio investment is growing at more pace as
compared to foreign direct investment. In the year 1998-99 and 2008-09, there was
negative portfolio investment. Especially in the year 2008-09, due to global financial
crisis, there was divestment as the foreign investors opted to take the money back and
go away from the market. Thus, due to direct investment, there is no instability, but
portfolio investment involves instability as there is no consistency in foreign portfolio
investment.

But it is even more significant to observe the relationship between the foreign
Institutional Investment (FIIs) and the volatility in the Indian capital market. Volatility
is a measure of instability in the market. Normally, it is calculated with the help of
standard deviation of returns.

Table No. 8.8: FIIs in Indian markets and volatility*

Year Net Investment (Rs. Crore) Volatility

1992-93 13 ---

19
1993-94 5127 ---

1994-95 4796 1.3

1995-96 6942 1.5

1996-97 8575 1.7

1997-98 5958 1.8

1998-99 -1584 1.8

1999-2000 10122 2.0

2000-01 9933 1.6

2001-02 8763 1.1

2002-03 2689 1.3

2003-04 45764 1.8

2004-05 45880 1.1

2005-06 41467 1.7

2006-07 30841 1.6

2007-08 66179 2.7

2008-09 -45811 2.9

2009-10 142658 1.9

2010-11 146438 1.0

*Volatility is standard deviation of returns.

Source: Bloomberg L.P.

– Handbook of Statistics on Indian Securities Market, 2009, pp. 51

The Table No. 8.8 indicates the net investment made by FIIs in the Indian capital
markets vis-à-vis volatility in the Indian capital markets. During the year 1998-99, the
net investment by FIIs was negative. The same thing has been observed during the
year 2008-09. For the year 1998-99, the reason for negative net investment by FIIs
was political instability. Again after 1999, there was increase in FIIs net investment in
the Indian markets. Especially, after 2003, the net FIIs investment flourished in the

20
Indian markets. During the year 2008-09, there was negative FIIs net investment again
which was the result of global financial crisis which emerged at that time. But in the
corresponding year, the volatility was at its highest level since 15 years. These facts
prove the fifth hypothesis set for the study (Appendix A – 5).

II

8.3 Suggestions

In this part of the chapter, keeping in mind the present status of the capital market,
some specific suggestions, major areas of improvement and specific policy
programmes are elaborated.

8.3.1 Structural Changes in the Governing Bodies of Stock Exchanges

In the history of Indian capital market, it was observed that, most of the stock
exchanges were formed as association of persons or informal organizations. Now, as
per the recommendations of Justice Khania Committee, the structural changes in
major stock exchanges have taken place. For instance, BSE, which was registered as
non profit making association of persons, has now become a corporate entity and is
now being governed as per the Companies Act. But still a lot needs to be done in this
regard. Corporatization is just one of the steps in structural change of governing
bodies of stock exchanges. There are some speculative interests prevailing in the
capital markets which are purely unproductive. Investors, which are financing the
enterprises through new issue market (primary market), are real source of finance for
the enterprises. These investors form a key component in the entire capital markets.
Hence, the investors who intend to invest or regularly invest in the primary market,
should be given representation in the governing bodies of stock exchanges. Apart from
this, such representation should also be there in governance of companies as well as in
regulatory authorities like SEBI. Increasing representation of genuine investors rather

21
than speculators would surely provide better regulation over the companies in
particular and capital market in general.

8.3.2 Money Market Development

In the financial markets of a country, money market and capital market form important
segments. Though these markets (capital and money markets) seem to have different
characteristics and the instruments traded in these markets are totally different from
each other, there is some kind of association among these markets. In India, as
compared to the capital markets, money markets are lagging behind as far as
diversification of products and accessibility to the investors are concerned. Normally,
money market deals in short term funds while capital markets deal in long term funds.
Though this is the fact, in European countries money markets are also developed and
are more organized in nature and these markets are providing push to the capital
markets whenever required. In India, money market has no much penetration among
investors due to the reasons like limited access, lack of diversification etc. But money
market along with debt market may have the ability to provide the help to the capital
market. By increasing the market participants, relaxing the minimum investment
requirement and providing a variety of products/services, the money market in India
can be more organized and attractive, which would, in turn, provide the needed
support to the capital market.

8.3.3 Mergers of Stock Exchanges

As on today, there are 19 stock exchanges in India. Initially, the number of stock
exchanges was too low which was a hindrance for small shareholders to enter into the
market. Gradually, especially after independence, the number of stock exchanges
increased. The number touched a high of 23 stock exchanges in the year 2003. Now 4
regional stock exchanges have been derecognized by the SEBI and now there are 19
stock exchanges across the country. But it is interesting to note that more than 90 % of

22
the total turnover in the entire capital markets of a country takes place in the two
premiere stock exchanges of the country viz. BSE and NSE. There are number of
stock exchanges in India with very low turnover. Thus, these regional stock exchanges
do not have a promising future. Due to the technological advancement and variety of
products, NSE and BSE are the stock exchanges which are accessed by the investors
across the country. Therefore, there is a strong need for merger of the regional stock
exchanges. Due to this, the stock exchanges with lower turnover would be dissolved.
For regional investors, there may not be much problem as they can have access to the
other premiere stock exchanges in the country.

Another case in favour of mergers of stock exchanges is that only few and competent
stock exchanges should prevail. Due to this, the problems like inefficiency, imperfect
information, isolation may be automatically solved as these stock exchanges will be
technologically advanced and competent to provide the state-of-the-art facilities to the
investors and other players in the market. Similarly, there are very few companies
which dominate the entire market. Therefore, these stock exchanges, which may be at
distant locations, would be having less domination of big corporate players. One step
in this direction i.e establishment of one stock exchange for MSMEs is in progress.
For the regional and small investors, one stock exchange in a country with
benches/counters in various regions can also be thought of. This would reduce
regional imbalance, disparity and unjustified regional drains of capital.

8.3.4 Deeper understanding of the functioning of Stock Exchanges

Today, the capital markets are largely dominated by the domestic fund houses as well
as FIIs. Thus, there is a little room for small and genuine investors to participate in the
capital markets in a significant manner. Actually, it is expected that functioning of the
capital markets should have resemblance with social, political and economic
conditions of people in the country. Therefore, encouraging of stock exchanges’
development needs attention to how the rules are formulated and implemented. Such
an institutional framework has to be evolved only after understanding of functioning
of stock exchanges in much deeper manner. The inferences based on the aggregate
data may lead to misjudgment. This may not result in the required policy prescriptions.
23
The deeper understanding of functioning of stock exchanges would contribute to
appropriate policy formation for the stock exchanges. This would, in turn, facilitate
resource mobilization and thereby contribution of the capital markets to economic
development of the nation.

Another important factor is that a time has come to decide whether due to
dematerialization and quicker settlements, really the situation has improved or not.
Some of the market players and speculators as well as FIIs are in search of quick
returns. Therefore day trading has also emerged. With low delivery ratios (long term
investments), it is evident that preference of market players is towards quick returns
from investment. Therefore, role of Foreign Institutional Investors and domestic fund
houses like mutual funds need to be watched carefully.

8.3.5 Improvement in Participation by Middle and Low Income Group in the

Capital Market

Indian capital markets are dominated to a large extent by few big corporate houses and
FIIs. Due to the excessive speculation forces prevailing in the market, small investors
are keeping themselves away from the capital markets. These investors belong to
middle and low income group. In order to improve the participation of these genuine
investors, the need has arisen to have a task force consisting of officials from Ministry
of Finance and Ministry of Company Affairs. This task force should come out with an
action plan to spread the facilities of capital market to remote areas of the country. The
stock exchanges should also involve themselves in investor education programme.
Presently, this programme has very low success. Investors associations at various
locations, educational institutions and the associations like Chamber of Commerce
need to come together for investors’ education programme. The apex bodies like SEBI
need to monitor these programmes. Such programmes may involve imparting
knowledge about stock exchanges, their functioning, significance of savings and
investment, dematerialization, trading system and regulation. Such an exhaustive
campaign can be launched initially at metropolitan areas. Then gradually, this can be
percolated to municipal corporation area and then to the smaller towns and villages by
arranging functions at critically important locations- mainly taluka places. The
24
researcher humbly suggests that educational institutions can play an important role in
this aspect as they have presence throughout the country: in metros as well as in
villages.

Though this requires a time to implement such programme, it would have better
results in future. This would facilitate more resource mobilization by enhancing the
rate of savings. Ultimately, this would also facilitate improvement in the participation
by middle and low income group people where there are real and genuine investors.
For further improvement of participation of small investors, the transaction cost
involving demat charges, securities transaction tax and other charges need to be
relaxed to some extent through which this class of people may be attracted towards the
capital market.

Though SEBIs grievance redressal system is working properly, for regional investors,
an idea of ‘special investment court’ can be thought of at district level or at a cluster of
2/3 districts. Most of the times, it is possible that complaints are not reported to SEBI
as the people do not know the redressal mechanism. If such courts are located at
district places, or near their towns, investors may feel free to lodge their complaints.
These courts would also work within the guidelines/regulations of SEBI. This move,
in turn, would enhance the confidence among the small investors who are located at
different locations in various parts of the country.

8.3.6 Improvement in Regulations and Serious Punishment to the Scamsters

In the last two decades, more than 20 small and big scams took place out of which the
scams like Harshad Mehata scam, Ketan Parekh scam have had a deep impact on the
stock markets. Most of the scams in the last two decades have not been disposed off.
Therefore, some serious thought is necessary to restrict the frauds. There has to be a
time- bound programme to complete the investigation of the frauds/scams. More
attention should be paid on financial penalty to be imposed on the fraudulent players
of the capital market. In such cases, personal property of these people and the funds
misappropriated need to be attached and the same to be distributed among
small/aggrieved investors. The regulatory mechanism should also avoid overlapping

25
provisions with multiple regulations. Now, SEBI has been assigned powers of an
independent regulator, and it is working satisfactorily. But now since two decades of
SEBI’s existence are over, an evaluation of SEBI’s functioning as a regulatory
authority has to be done critically. Public debate on accountability, transparency,
corporate governance, disclosures etc. need to be initiated. If needed after evaluation,
SEBI’s role and functioning can be made even more strict and accountable towards
small investors. This would help in minimizing, though not completely abolishing the
scams in the Indian capital markets. RBI, Dept. of Company Affairs, Ministry of
Finance along with SEBI should come together to avoid overlapping of each other’s
role and thereby reducing the confusion among various investors as well as the
regulators.

There is large number of companies with small or almost nil turnovers. These
companies are still alive in stock exchanges like BSE and other regional exchanges.
These companies are sold to the fraudulent promoters and scamsters. Such
manipulated transfer need to be banned and restrictions be imposed on such activities.
This would also minimize the abuse of small companies and risk associated with
investment in small companies.

8.3.7 ADR, GDR, IDR, and PN.Route-

Since last decade or so, companies are using the weapons like American Depository
Receipt (ADRs) Global Depository Receipts (GDRs), Indian Depository Receipts
(IDRs) to raise the finance from the international capital markets. SEBI has taken a
good step to ban PN-route of investment in Indian market. These participatory notes
were allowed for investment in India markets without disclosing their source. Now
time has come to closely monitor the investments made through ADRs, GDRs and
IDRs. Review and evaluation of such investment with reference to the source of
income, objective of investment and tenure of investment needs to be done carefully.

Test checking and test audit of the companies using this route should be done. In this
aspect, SEBI and RBI need to function with greater harmony. The money which
comes in the market with suspicious source needs to be closely monitored. Recently,

26
the Union Home Minister has also opined about the possibility of terrorists’ money
which comes into the capital markets. If the sources of such investments are
monitored, the system can reject the investment in such route. Similarly, it was also
observed that the money which was coming in Indian markets from Mauritius had its
origin in Indian investments in Mauritius with benami transactions. This is the reason
why the sources of foreign investment have to be closely monitored, controlled and
regulated.

8.3.8 Towards the Future- Improvement in Efficiency of Markets

Indian capital markets are not known for their efficiency in general. Due to the
presence of insider trading, price rigging etc. the Indian markets lack efficiency. In
order to test the efficiency, there is ‘Efficient Market Hypothesis’ which states that
securities are normally in equilibrium and are ‘fairly priced’. One cannot beat the
market on account of his own trade. In such situation if there are really ‘fair prices’, it
can be said that, markets are efficient. There are three aspects of EMH-

-Weak form EMH-‘One cannot profit by just looking at past trends of the market..’
Positive or negative trend of last few days may not assure the same or reverse trend in
future. In most of the capital markets, this form prevails but still technical analysis is
used to take decisions in the market.

-Semi-strong form EMH- ‘All publicly available information is reflected in stock

prices.’ Thus, the annual reports, financial data of the companies help to price the
securities correctly. This also holds good in many of the markets.

-Strong form EMH – ‘All information even insider information, is reflected in stock
prices.’ This is a state of highly efficient markets, but practically this is far from
reality.

In India the evidence supports semi strong form of EMH. Therefore, there is a room
for improvement in efficiency in the markets. For this purpose, flow of information
should be very fast and nobody should be able to have undue advantage of information
access. All the market players should get the information at the same time irrespective

27
of their location/ status. Though this is very stringent condition, and difficult to
practically implement, the flow of information can be quicker. Announcing the
relevant information (mandatory as well as non-mandatory) on the websites of the
companies and the stock exchanges as well where these companies are listed.
Similarly, the financial and economic journalists be provided the relevant information
in time so as nobody can have advantage of ‘early access.’ The news channels,
websites and newspapers are the media which have to be used effectively to improve
the efficiency of the markets. Ultimately, this would result into dissemination of the
requisite information to all the concerned without delay. Every player of the market
should be able to access the information immediately when such information is
disclosed. Nobody to have undue advantage. This would prohibit insider trading and
thereby, facilitate and improve efficiency in the capital market.

8.3.9 Integration of Indian and International Capital Markets

Recently, the ups and downs in the prices of stocks have a large resemblance with
global financial events. The subprime crisis which originated in the US market in the
year 2008 had a negative impact on global financial markets and Indian markets were
also not exception to that. Recently, in August 2011, when the reputed credit rating
agency ‘Standard and Poor (S&P)’ reduced credit rating of the US from ‘AAA’ to
‘AA+’, there was again immediate downturn in the global markets. These are only few
instances which prove that Indian markets are run not only by the indigenous
investors, but they are susceptible to strong impact of global financial happenings also.
This is particularly true because of opening of the economy. The investment in Indian
market can be made by global players. Though there are few restrictions, due to the
liberalization policy, Indian capital market has become an integral part of global
markets. Earlier, Indian markets were isolated with almost zero impact of global
events. But due to the new economic policy as well as the fact that Indian markets are
one of the best emerging markets, more and more capital is being attracted in the
Indian markets. But this money is also regarded as ‘hot money’ as it can go anywhere
immediately. International agencies, FIIs are continuously in search of emerging

28
market and whenever they find another option, the capital invested by them may fly
away from India quickly. This destabilizes the Indian markets.

Therefore, a cautious approach towards the role of FIIs and FFIs needs to be
developed. If some concessions are given to them in taxes and costs, if they remain
long term investors, this problem, to some extent, can be solved. Time and again, it
has been proved that when FIIs enter into the market in a big way, retail investor look
to exit. In order to protect the retail investors, a need of such cautious approach can be
underlined. Further, the Committee on Capital Account Convertibility has also
suggested a cautious approach while making rupee convertible on capital account.
Firstly, the markets should be allowed to have efficiency. Secondly, there has to be
strong domestic fund houses like mutual funds to compete with FIIs in the market.
Finally, a large number of investors (indigenous/local) should be present in the market
to absorb without severe losses the shocks given by the FFIs and FIIs. This would
prove the purpose of investors’ protection and at the same time, making the market
competent and integrated with the international markets.

8.3.10 Association with BRIC Markets to Absorb the Shocks

Internationalization of the capital market has become inevitable in the days of

globalization. Therefore, in order to keep the domestic market away from frequent
shocks of global and especially European and American markets, there is a strong case
to get associated with emerging economies in general and BRIC economies in
particular. India, along with Brazil, Russia and China has a globally respected market.
But this market, many times, has proved to be vulnerable because of increasing
presence of FIIs in the market. In order to have a check to this, there can be
association of these economies with reference to their financial markets. All these
emerging markets are competing with each other. Hence, all of them have an equal
threat of ‘hot money’ which has a potential to cause vulnerability and instability. If the
capital markets of all these countries have their own association, they can have better
check on this ‘flight’ of capital. Similarly, FIIs would be left with very few options
excluding these emerging markets. Hence, they would also become serious about their
investment in emerging markets for long term. For short term, it may destabilize the
29
markets, but for long term, this would be a good step in the interest of the long term
investors as well as the financial markets.

Mostly, the US and the European investors are driving the global markets. In order to
minimize the adverse impact of integration of capital markets and to reduce the
pressure of FIIs in the domestic markets, such association would be helpful for the
sustainable and long term development of the capital markets.

8.3.11 Establishment of a Stock Exchange for Rural and Agricultural Sector

As it is evident from the erstwhile discussion in this chapter, capital market is not well
connected to the rural economy. The development of capital market has not facilitated
development of rural economy so far. Rural economy is connected mostly with
agricultural sector. Thus, agriculture has grossly remained a neglected sector by the
capital market. So far, capital markets have paid almost no attention towards
agriculture. The reason is that stock exchanges facilitate resource mobilization for
corporate sector and corporate sector has limited or no interest in agriculture. There
are very few companies which have agrarian operations. Most of the corporate sector
has service and manufacturing companies.

Therefore, a time has come to think upon the development of rural and agricultural
sector through the capital markets. There can be two possible ways in which this may
be done: Either a separate stock exchange be established which would list only those
companies which are having agricultural operations; or the other remedy is that, the
existing stock exchanges like NSE and BSE be asked to open benches or counters in
various districts or rural areas. Though this seems to be a difficult task, a prototype
model may be applied at a particular place and if it succeeds, it can be replicated
throughout the country. Thus, the problem of neglected sectors can be overcome with
this step and this would also encourage entrepreneurship and capital formation for
agricultural sector and rural economy can thus be connected to the stock exchanges.

8.3.12 Roadmap to Develop the Capital Market

30
The time has come to bring out the roadmap which would concentrate on further
developments of capital markets in India. This roadmap can bring out the phase wise
development in the capital market. The biggest problems in Indian capital markets are
excessive speculation, lack of liquidity, insider trading and instability due to the
speculative forces. These problems can be investigated deeply and instead of solving
all the problems immediately, gradually, an individual problem can be sorted out. The
roadmap can phase out the problems and the requisite time bound programme to
overcome these problems. The first phase may be upto the year 2020 and then the
phase wise development for each five years thereafter can be thought of for this
purpose. As it is difficult to predict and project the year 2050 from now, at least the
phase wise plans can be prepared for the period upto 2035 or 2040. These plans may
have the following steps in the phase wise manner.

i. Enhancing the ratio of market capitalization to GDP: Presently this ratio is less than
100 % which may be gradually enhanced to 150 % in the next two decades.

ii. The penetration of the capital market services be deeper: The small and genuine
investors be attracted from –urban, semi urban, rural areas in a phased manner to
increase the presence of small investors who are genuine and long term investors.

iii. The problem of liquidity and instability can also be sorted out by enhancing the
participation of more and more retail investors.

iv. The corporatization and demutualization should take place rapidly to improve the
governance of stock exchanges. Further, merging of all defunct and low-turnover-
stock exchanges with either BSE or NSE be chalked out in a phased manner.

v. As NSE has become dominant stock exchange, in order to avoid possible

monopoly of NSE in future, BSE should come up with technological advancement as
well as diversification of products/services. If needed, SEBI and government may
provide some push to BSE to maintain healthy competition and avoid monopoly in the
capital markets. The BSE’s development plans can also be chalked out in a phased
manner.

31
8.4 Epilogue

The Indian capital markets, since last few decades have emerged as one of the
promising capital markets of the world. Due to the opening of economy, there has
been a sea change in the way in which the markets are functioning. The trading system
which involved open outcry and physical delivery of shares is now replaced by online,
screen based trading and dematerialization of securities. The emergence of NSE as a
leading stock exchange of India and at the same time, emergence of SEBI as a strong
regulator are two important landmarks in the history of Indian capital markets which
dates back to almost one and half century. Even though there are drastic changes in the
Indian capital markets since last two decades, some inherent problems also were
developed during this phase. Some of these problems like insider trading, low liquidity
and speculation are there since long back. But recently, as there were innovations in
trading and new technology being introduced, some problems crept into the markets.
More transactions in the derivatives markets, increasing presence of Foreign
Institutional Investors (FIIs), are some serious pressures which are being observed in
the Indian capital markets.

Though SEBI has been looking after the markets as a regulatory authority
satisfactorily, there is still a need to have some more steps for further development of
capital markets in India. Among the other measures, investors’ education is one of the
important suggestions for development of the capital market. Though SEBI and some
stock exchanges are already working on it, a lot needs to be done in this area. Investor
education would help penetration of the capital markets further into semi urban and
rural area. Apart from this, more attempts are needed to increase the confidence
among the small and genuine investors. The roadmap consisting of various plans of
five years for the next three decades may be an important step in overall development
in capital market. As the markets are now becoming integrated with global markets, a
cautious approach is needed for allowing or attracting more and more foreign
investment in the Indian capital markets. As India remain an attractive investment
destination for the global market players, the inherent strength and stronger domestic
fund houses are necessary along with proper regulations for a competent, attractive

32
and sustainable market. Approach to capital account convertibility has to be cautious
but positive.

33
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Bhave C.B. – “Address from the desk of MD”- www.nsdl.co.in ,2004
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Bhole L.M. (2006)- “Financial Institutions and Markets” 4th Edition, Tata McGraw Hill Publishing House, New Delhi,
pp.23.1.
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Datt, Rudar and Sundaram KPM- “Indian Economy”, S.Chand and Co. Ltd.,2002, pp.33

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