Abstract:
It is being increasingly felt that the revival of Indian primary market has become an important tool for keeping the economy going. During the period 1996 to 1997, the markets nosedived miserably. Studies conducted during that period reports that the investors had a tendency of staying away from the stock markets.During early months of 1998, shares, which were not traded for onces on the BSE or the Bombay Stock Exchange increased to 3,769 in the month of February from 2,199 in the month of January. It was found that the shares had a face value of Rs 39,677 crore.
Decline in liquidity:
Further reports also suggest that since the year 1994(December), there was reduction in liquidity pertaining to "non specified securities". It was discovered that during the same period(December, 1994), the securities belonging to the "B" group were Rs 6,349 crores. This nosedived to Rs 666 crore by 1998 February. However, there was a increase in the number of securities to 6,799 from 6,077.By observing the above trends, many experts suggested few possible measures for handling the same.
Strategies pertaining to revival of Indian primary markets:
During the year 1998, the Chief of Bombay Stock Exchange enumerated certain strategies for the revival of the Indian primary market in consonance with the then prevailing situation of the primary markets. They were as follows:- It was suggested that the companies with adequate reserves ought to buy the shares back from the markets.
- The companies coming out with rights issue or IPOs , ought to keep provision for the investors to buy back shares similar to the issue price for as many as 1000 shares. The company should also extend this facility for a period of 12 months as a post listing safety net.
- The Chief also suggested that there should be a provision for "Turnaround Fund". Formulated by the financial agencies, the fund would serve as a cushion for trading shares(selling and buying), which are not traded on a regular basis but were strong in fundamentals.
- For reviving investor confidence, it was also suggested that the companies, which access the ECBs or External Commercial Borrowings as well as GDRs or Global Depositories Receipts ought to make offer of 25% pertaining to public offerings domestically.
