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KOLKATA, Sept 18

THE ailing regional stock exchanges (RSEs) have found a champion in Mr Shitin Desai, Vice-Chairman and Managing Director of DSP Merrill Lynch, who has come out strongly in their favour. According to him, transactions below a certain cut-off size should compulsorily be routed through the RSEs or even the Over The Counter Exchange of India (OTCEI).

The regional bourses, which have lately seen a major decline in business volumes, could benefit from such a move. RSEs should have access to capital issues below a certain size, say, Rs 100 crore.

Mr Desai's observations may be viewed in the current context of the growing debate over the continuity of small exchanges. "The minimum size of investment in IPOs should be larger than what it is today," Mr Desai said while speaking at Fintech 2002, a conference organised by CII, adding that there was a need to develop alternative instruments for investors. Earlier, Mr Desai spoke on the three I's of the capital markets — the investor, the intermediary and the issuer — and the reasons why each of the three should maintain its integrity. As for intermediaries, he specifically underlined the need to study their track record. An investor should look at the quality of an intermediary from the nature of issues handled by the latter.

He also questioned the effectiveness of quarterly reporting by corporates as it was being done today. An investor, he felt, really had a lot of expectations which often led to a decline in stock prices whenever a company issued a profit warning for a certain quarter.

"There is a need to change the market's mindset," he remarked in this context, adding that the Indian system required legal reforms that would help the authorities initiate quicker action against offenders. Investigations into the Harshad Mehta scam, he reminded listeners, did not result in any real punishment. The regulatory agencies in the UK and Singapore, however, had successfully identified and booked the offender involved in the Barings scandal, he pointed out.

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