CIIs prescription for the markets
By Alok Agarwal | 08 Oct 2001
Mumbai: Concerned over the persistent downtrend in equity values and the sharp overall decline on stock markets, the Confederation of Indian Industry (CII) has made the following suggestions to engineer a revival over the period of next three months. It has suggested:
- Reducing general interest rates by 1 to 1.5 per cent.
- Introduction of margin-trading.
- Margin requirement be removed for both FIs and FIIs.
- Raising annual limit on creeping acquisitions to 15 per cent from the current 10 per cent
- Fix lending of margin money to market intermediaries at 25 per cent.
In a communiqu, it has said: In the background of the Federal Reserve and ECB cuts, the RBI should reduce interest rates by 1 per cent to 1.5 per cent. Though this may not spur investments in the real estate, it would give positive signals to equity markets and the industry, which have been expecting a rate cut for some time now.
Though the RBI had announced introduction of margin-trading, it is yet to take off. Margin requirements had been fixed at 40 per cent, which CII feels should be brought down to 25 per cent.
CII feels the ban on badla has been one of the main reasons for drop in volumes and liquidity. It is imperative to reintroduce systems of margin-trading without the negative attributes of the earlier ones.
CIIs other suggestions include reduction in dematerialisation time, introducing electronic fund transfer, demutualising stock exchanges and reducing the number of stock exchanges in the country.
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