New Delhi, March 18: Indian stock exchanges (SE) should implement corporate governance and act as self regulatory organisations (SROs), whereas the Securities and Exchange Board of India (Sebi) must act in a more responsible manner to face the challenges of a global capital market, a study conducted by management students of Georgetown University has said.Commenting on the Indian capital market, Georgetown University professor of finance and the study team leader, Ms Reena Aggarwal said: "The Indian capital market should get ready for globalisation, as it cannot escape the global market trend." Ms Aggarwal also said that regional stock exchanges are things of the past globally, and the same is also true in the Indian context. Without naming the exchanges, she said that only two or three exchanges will survive in India in the long run. She, however, declined to comment on the details of the study, the Georgetown University students conducted for Sebi and the Delhi Stock Exchange (DSE).
Speaking about the role of Sebi during the recent crisis in the domestic capital market, she said, a regulator should not take decisions haphazardly as the market does react positively to a suddenly imposed new regulation.
"A good regulator should not add a new regulation at the time of crisis. But it should preempt such a situation and introduce any new regulation well in advance," she said.
"Even in the US there is a system of circuit breakers. Investors or market operators know that if index drops beyond a point, a circuit breaker would automatically apply," she said, adding that Sebi should also have a certain margin requirement for such times.
Speaking about the growing importance of stock exchanges in the era of globalisation of capital market, Ms Aggarwal said: "Not only the function of stock exchanges needs a total change, but they should act as SROs with profit as a motive."
"In such a scenario, integration of regional stock exchanges is the major condition with a vary efficient regulator to avoid any clash of interest between the two exchanges," she said.
Speaking about the erosion of market capitalisation of technology stocks, she said that it was a global phenomenon. "It was a speculative bubble and it had to burst. But market has perhaps over-reacted. It will certainly recover to a normal position of 12-15 per cent growth very soon," she said.
Ms Aggarwal is associated with McDonough School of Business, Georgetown University for past 14 years and has studied capital markets of the US, Mexico, Brazil and Peru.
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