The no of suicide cases are more from the financial crisis arising out of stock market meltdown compared to farmers. Therefore the need of the hour is to restore confidence.
Ask FII's to reverse all their lending within 30 days. 30 days time frame is more sufficient to cover all lending in the light of the fact that FII's themselves agree that selling is more due to redemption pressure. This act will provide exit to all wanting to sell due to forced sell. It will act as balancer.
Reduce STT to pre budget level to bring back jobbers which used to provide handsome amount of liquidity. Govt can afford to forgo small amounts of tax worth Rs 300 to 1000 crs on capital gains and STT as they are now saving over Rs 1 lac crores in OIL.
Make short term capital gains tax zero as this will help only domestic investors and help divert savings. FII's are in any case using tax heavens to avoid tax in India.
Bank lending against shares to be raised from Rs 20 lacs to Rs 200 lacs and the margin should be only 30 pc instead of 50 pc to restored to 50 pc after market reached 10000 plus.
All M F investments should be made dividend tax free. All savings diverted to MF will get IT benefit upto Rs 5 lacs across the board from the existing Rs 1 lac selectively.
Cut the CRR rate repo rate and interest rate simultaneously to create across the board impact on liquidity and consumption.
Use the market stabilization funds by investing in the stock market which is being done by all Govt's world over.
What exchanges and market regulators can do…
Differentiate between long and short by imposing double margins on shorting. The margin on long had been increased to 25% in case of nifty recently which has also triggered in huge winding up of long due to margin as well as mark to mark. At the same time shorting has seen mark to mark credit giving upper hand to short sellers. Margins should be made 50 pc in case of shorting which could provide level plying. This will help short covering.
Increase the creeping acquisitions limits to 15% across the board so that all promoters wish to provide exit to investors mat use this opportunity to buyback their shares.
Introduce physical settlement immediately. JPC in 2003 has directed FNIMIN and market regulator to introduce the physical settlement which has till date not been implemented. This has been used to distort the share prices on the last day of the settlement. If this is not possible then the derivative market be renamed as speculative markets as the very purpose of hedge is missing.
There is mechanism to bring the price rigging to book where even Rs 50000 benefit has met with market regulators action in rising market but there is no mechanism in vertical fall in scrips. There is no instance where investigation has resulted in action in shorting.
All IPO should have a condition of market making for 12 months. The price band be fixed. This will allow Govt funds, PF, ESI, trusts and small savings to enter capital markets to make it healthy. This will also stop R Power and Resurger like episode in the market.
Bring all foreign broking houses under insider trading rules for making any comments in any share where they have executed buy or sell transactions on behalf of their foreign clients. Typically it is seen they execute huge buy and/or sell orders for weeks and months after the event is getting over they come out with reports and issue comments of weakness and firmness as the case may be. Recently it is seen in Tisco and RIL.
