The new chairman of the Securities & Exchange Board of India (Sebi), Chandrasekhar Bhaskar Bhave, inherits a job whose definition was changed radically by his predecessor over the past three years. The big important signal that Indian investors wanted sent out by the stockmarket regulator was that mischief would be scotched without ado. Over previous years, several bouts of market volatility had been interpreted as the engineered work of shady stock manipulators. As Meleveetil Damodaran leaves office tonight, one of the key achievements that he can look back upon with satisfaction is the sharp improvement in the conviction rate for market-related offences. This has been in line with his promise of swift and heavy punishment for those who flout rules, made when he took office. Under his watch, for perhaps the first time ever, we had Sebi blowing the lid off a scam in the IPO market, without the media and main market participants getting wind of it first. This was impressive in itself. The response was no less effective.
Over his term, Damodaran has managed to push through several key reforms in the equity market. He championed qualified institutional placements (QIPs), introduced in May 2006, enabling companies to raise funds from the market quickly without having to go through the long public offer process. This received wide applause. The concept of IPO grading, however, attracted criticism. In the past few years, Sebi has formulated an IPO norm assuring a 5% quota to mutual funds (MFs), made Pan-citing mandatory for transactions in the securities market and rationalised the rules on investment in MFs. Agency commissions for MF deals struck through the Internet, for example, have been done away with. But Damodaran would possibly be on weaker ground defending Sebi?s ban on participatory notes?an indirect way for foreign investors to participate in the Indian equity market?in the derivatives segment, something that the central bank was in favour of for a long time but both Sebi and the finance ministry had opposed. Still, all in all, the Indian stockmarket is now seen as a safer place. And Bhave?s succession is welcome, given his professional reputation. He was part of the original band of market reformers who took wing under the first Sebi chairman GV Ramakrishna. He must now keep the regulator as alert as ever.
