This refers
to your editorial Reducing FII
dependency (Business Line, September 9,2013) It is rightly said that there
is a paramount need to counter FIIs influence in our financial
market in general and forex market in
particular and the Pension Fund Regulatory can create a strong domestic institutional
investor base in the long run., The fact
that FIIS are able to dictate terms to
the capital and forex market since the
days of liberalization of our economy despite the presence of Insurance
Institutions, Mutual Funds, Provident Fund, banks and a whole lot of whole sale and retail
traders only reflects the weakness of our markets and these investors. It is high time our investors and the
authorities have a strategy to counter FIIS and see that some semblance of
order prevails in the market and the volatility is range bound and some what
predictable and manageable. The buy and sell policy of domestic institutions
has to necessarily counter the buy and sell strategy of FIIS.
The
suggestion to attract Indian households savings to capital market in this
context is very apt and worth attempting. This requires incentives and a good
amount of marketing. SEBI and the government have to work jointly to provide
some incentives for retailers to enter the capital market. Some of these could
be tax exemption up to Rs one lakh of investments in the Capital market, granting
of Loyalty bonus to shareholders who do
not trade the shares and retain them for a minimum period of two years, tax
incentives to companies who hold maximum retail holdings of shares and who declare
regular and high dividends , and using STT as a major tool to have a check on the buys and sells. The NRI’s
should have attractive and flexible rules to invest in the market and this
should be widely publicized.
Dr.T.V.Gopalakrishnan
(This comment is in response to the editorial Reducing FII dependency that appearedin BL dated 9/9/13).
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