Competitive Exams: Current Affairs 2012: India՚s 3rd Major Stock Exchange

Get top class preparation for competitive exams right from your home: get questions, notes, tests, video lectures and more- for all subjects of your exam.

  • The approval for MCX-SX to set up India՚s third major stock exchange comes in a year when interest in the financial markets among retail investors has reached its nadir. So, as a move to perk up interest among investors, this is a step in the right direction.
  • The primary justification for a stock market to exist is to provide liquidity to companies listed there and create an easy investment avenue for the middle class.
  • As the world economy lurches through a prolonged recession, with daily liquidity at the cash market in India՚s National Stock Exchange plummeting to just about ₹ 12,000 crore, it will be interesting to observe how the new exchange is able to ramp up liquidity.
  • The Indian financial sector has lagged behind the rest of the economy as a means to raise funds to maintain a trend GDP growth rate of 8 per cent per annum. Since interest rates too are higher in India than in comparable economies, the combination of shallow liquidity and high rates has encouraged a raft of companies to move their financial requirements overseas.
  • In the calendar year 2010, before the economy tumbled, the total primary issue was only ₹ 48,654 crore. Compared with an aggregate bank credit of ₹ 35,82, 048 crore, this looks paltry and shows the extent to which the Indian economy depends on the latter [Bank Credit] . This asymmetry needs to be addressed.
  • To the extent that the new exchange is able to make retail investors come in to trade and small enterprises to list, the depth of the markets will improve.
  • For the Indian economy, this will be the measure of the success of this bold new venture.

Courtesy: The Hindu

Developed by: