Lok Sabha elections results: Stock markets prepared for 'anyone indulging in any irregularity', says U K Sinha

Written by PTI | Mumbai | Updated: May 16 2014, 02:57am hrs
Lok sabha electionWe are conducting stress-tests for stock markets, says Sebi chief U K Sinha.
Markets watchdog Sebi today said the stock markets are prepared to deal with "any irregularity" in trading tomorrow, when the results for the 2014 Lok Sabha elections are to be announced.

"We want to assure investors that we are prepared for any eventuality and if anyone indulges in any irregularity in the market, we are fully prepared for that," Sebi Chairman U K Sinha told reporters on the sidelines of an Assocham conference here.

"Sebi along with the Reserve Bank and the government, has prepared a strategy for any unusual market movement. We have all the rules in place. So the exchanges will act accordingly, if anything unusual happens. We are conducting stress-tests for markets on a daily basis," Sinha added.

In the last two elections, stocks had reacted sharply after results were announced, triggering circuit-breakers.

While in 2004, the markets tanked after the NDA was voted out, in 2009 the market hit circuit breakers many times on the day of counting after the UPA was voted back to power.

BSE Sensex on May 18, 2009 hit the upper circuit within 30 seconds of the market opening for the first time after the Lok Sabha results were declared, and trading was halted for two hours.

The indices again hit the upper circuit within minutes of the markets re-opening, and trading was called off for the day.

On May 14, 2004, when the Congress-led UPA emerged the surprise winner in the general elections, the BSE Sensex fell as much as 6.1 per cent and plunged another 11.14 per cent the next day.

At an interactive session on re-energising primary equity market, Sinha said he is concerned about its health. Last month, Sebi had asked investment bankers to come up with suggestions to revive the primary markets after gathering views of exchanges, brokers and corporations.

Weak sentiment in the secondary markets, tepid retail investor interest and stretched financials of corporations have together caused a steep fall in the funds raised via the Initial Public Offer market.

In 2013-14, a little over Rs 1,300 crore was raised from IPOs. In the previous two years, corporates raised around Rs 12,000 crore and Rs 15,000 crore respectively. In 2010-11, corporates had raised Rs 58,000 crore, Sinha said.

In last three years corporates desired to raise funds and even filed DRHPs, to the tune of Rs 60,000 crore, but plans were dropped. In fact, more than two-thirds of IPO stocks are trading below their issue prices, Sinha said.

To revive the primary market, Sebi has come out with a safety net to guard retail investors interest, but in view of strong objections from corporates it dropped the idea.

"Our job is to encourage corporates to raise money from the domestic market and not in foreign market," he said, adding that "our market today has over 1,700 FIIs, so its not that you do not have access to international institutional market".

On the rising FII money, he said that so far this year, USD 10 billion has come in, of which USD 5.5 billion was into equities.

Sinha said there is need for domestic institutional investors' base to increase. With pension reforms, we can create vibrant domestic institutional investor framework.

He also stressed the need of corporate bond market required to be developed. Insurance regulator Irda and pension sector regulator PFRDA have come out with guidelines to invest in corporate bond market.

In 2013-14, 35 companies raised Rs 7,000 crore from corporate bonds of which Rs 6,000 crore were through private placements, he said.