During the COVID-19 crisis, the Indian government and regulators are mulling over various mixes of finance instruments to revive the Indian economy. But there is a need to act fast in developing instruments that will address the appetite of risk-taking investors, stated experts at the Assocham national e-summit.
Speaking at ‘Role Of Alternative Source Of Funding’, Ashvin Parekh, Managing Partner, Ashvin Parekh Advisory Services, said, “We need to develop more instruments.” This mainly is to make the market favourable to risk-taking investors. He added post-COVID-19 it will be a new world and India needs to prepare itself.
Adding to it, Nipa Sheth, Founder and Director, Trust Group said the exchanges will have to explore more instruments as well. However, she added during the COVID-19 period, many investors opted for commercial papers.
Ashish Kumar Chauhan, MD and CEO, BSE India, revealed that during the crisis Rs 4 lakh crore worth of commercial papers were raised in BSE platform. He added during most crises India had been on the wrong side of history. “Today, it is on the right side of history.” So, he felt that as a country India should explore the opportunity that is out there. In BSE’s SME platform around 328 companies are listed. “Some SMEs were listed even during the pandemic," he added. He strongly believes a close watch in the geopolitical situation is needed.
Meanwhile, during the special address, D K Mittal, Former Finance Secretary, Department of Financial Services, Ministry of Finance said most investors want to keep their money safe today. He stressed in the case of those who want to invest they (risk-taking investors) find limited avenues. Mittal asserted it will take until March 2022 for the world to leave behind the impact of COVID-19 and move ahead. He added that there will be a permanent change in consumer preference which means demand and outputs will have to be based on those preferences.
Citing the changes COVID-19 has attracted, Sheth said, the market is nervous to raise money. To tackle this, the Reserve Bank of India (RBI) cut rates, new policies were introduced by the government among other things. This helped increase liquidity in the system. “In the case of developing economies, such crises pave way for a lot of reforms.” She added that every economy around the world is doing what suits them the best, India is no different.
Sundeep Kakkar, MD and head investor sales, Citigroup said, “Today, India’s bond market is at the lowest level.” He added further people who brought dollar bonds in between April and June are enjoying good returns today. He stressed that interest rates are the lowest in the country today yet it is attracting foreign investors in the country. Moreover, the domestic market is so feasible today that Indian institutions do not wish to venture out of the country to raise ECBs (external commercial borrowing).
Parekh further added that while many existing investors are selling their stakes with or without making profits, many risk-taking investors have come to the Indian market. However, he stated the dichotomy between RBI and the finance ministry is not working in favour of the market. While the finance ministry is open for innovative tools, RBI is looking at stability. So, RBI has to maintain cautiousness. But both sides will have to reach a middle ground to attract more investments, he added.