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Municipal bonds to play important role in smart Mumbai projects

Despite the euphoria in the country after electing a new government that has presented an excellent budget, the primary market in the country has shown no growth, observed U K Sinha, chairman of the Securities and Exchange Board of India, on Monday.

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Despite the euphoria in the country after electing a new government that has presented an excellent budget, the primary market in the country has shown no growth, observed U K Sinha, chairman of the Securities and Exchange Board of India, on Monday.

Addressing the 6th Capital Markets Summit of Confederation of Indian Industry (CII), the Sebi chairman said the money raised via primary market in the first 11 months of current fiscal was a mere Rs 1,500 crore. "It is only a fifth of the money raised in 2013-14," Sinha said.

On Alternate Investment Fund options available in India, the Sebi chief said the regulations related to Real Estate Investment Trusts (REITs) in India were in line with some of the best in the world and similar to developed economies like Singapore and the US. REITs has the potential to take up a substantial chunk of the Indian capital markets as well.

Citing an example of Singapore where 32% of IPOs were through REITs, Sinha was hopeful of seeing similar growth in India especially after the government rationalised capital gains tax regime.

Development of bond markets in India is the foremost priority of the Indian government but India does not have enough domestic pools of funds that invest in these markets.

"Sebi is coming out with regulations on municipal bonds very shortly and these bonds will play a very important role in the aspirational '100 Smart Cities' mission of the government," said Sinha.

He also wondered why pension funds were not finding its way to capital markets.

"A well endowed domestic pension fund in India will be the panacea for a robust and sustainable capital market," Sinha said.

India does not have too many large domestic institutional investors that invest in Indian capital markets. He urged captains of the industry to see the potential and asked them to look at national pension scheme of Pension Fund Regulatory and Development Authority as a social security option for their employees. This would ensure large corpus of long-term funds were made available for investments in capital markets.

He was of the view that a market, which has a large corpus of foreign institutional investments, with long-term equity investment in the markets for domestic pension funds could reduce the vulnerability of the capital markets.
He invited the Indian industry to use the primary market route to generate capital especially as the world over, the Indian economy is being projected to grow at rates as high as 7% in the coming years.

On start-ups, Sinha said the regulator will soon have a discussion paper to facilitate listing especially when in most case they incur losses in the initial growth phase.

"We will have separate norms for listing by such new age technology companies."

Sinha noted that despite the new regulations of the Companies Act 2013 for having women directors on board, very few adhere to the norm. He urged the industry to ensure compliance as it reflects on corporate governance. Non-compliance emit wrong messages to the world, he said.

Addressing the summit, Nimesh Kampani, chairman, JM Financial said the focus now needs to be on reviving investment sentiment to achieve the goals of government's 'Make in India' project.

Chandrajit Banerjee, director general of Confederation of Indian Industry, said the need for capital has to be hastened to foster economic growth.

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