Page 25 - DCOM304_INDIAN_FINANCIAL_SYSTEM

Indian Financial System

Notes  There is an almost eight fold increase from ` 1, 700 crore to over ` 13, 000 crore during the
period 1990-91 to 1994-95, because of the floatation of a string of mega issues including
SBI which made the largest ever issue in the history of the capital market (2,502 crore in
1993-94), also heralding the entry of banks into the capital market arena.
 The other steps taken by the government to strengthen the market for government securities
was through an upward revision in interest rates and the introduction of a system of
auction of securities and provision of refinancing facilities for these securities that gave
impetus to the new issue activity in the country.

Table 2.3: Resources Mobilized through New Capital Issues

Period No. of issues Amount Period No. of issues Amount
( crore) ( crore)
`
`
1990-91 141 1,704.35 2000-01 124 6,617.70
1991-92 196 1,898.25 2001-02 19 6,422.74
1992-93 528 6,251.83 2002-03 17 5,731.57
1993-94 770 13,443.19 2003-04 45 22,144.57
1994-95 1343 13,311.60 2004-05 59 25,506.34
1995-96 1428 11,822.18 2005-06 138 26,940.00
1996-97 753 11,686.56 2006-07 119 32,382.00
1997-98 62 3,061.22 2007-08 115 83,707.00
1998-99 32 7,910.14 2008-09 45 14,671.00
1999-2000 65 7,613.14

Sources: Prime Data, Business Standard and RBI Annual Reports
 Because of economic and industrial recession, political instability, and the changing pattern
of household financial savings the new capital issues gradually declines in 1997-98 to
` 3,061.22 crore.
 The nature of the new issue market also changed with the bank on 'carry forward' since
January 1994 as also commencement of screen based trading at NSE and BSE.
 Some signs of revival were seen 1998-99 terms of resource mobilization. Total resources
mobilized through prospectus and rights issues more than doubled to ` 7,910.74 crore
from ` 3,061.22 crore in 1997-98.
 Despite a significant increase in the number of floatations there is a sharp decline in the
primary market in resource mobilization during 2000-01, Although resources raised by
both public and private sectors declined, the decline was much sharper in the case of the
former with PSUs and government companies remaining absent from the public issues
market for third consequent year. It is interesting to note that resources raised by banks
and financial institutions after surging to ` 4,352 crore during 1996-97 continued to decline
in the subsequent years touching an all time low of ` 1,472 crore in 2001. This is due to
persistent depression in new issues market.
The sterling performance of the new issue market in India in recent years is the reflection of
effectiveness of the measures initiated by the government/SEBI to develop the market and
restore confidence. Some of such factors are:
 strong macroeconomic fundamentals and higher growth rate trajectory embarked upon
by the Indian economy buoyancy in the secondary market

 encouraging both issuers as well as investors to enter the primary market
 countrywide enthusiasm in the community of entrepreneurs to enlarge and modernize
manufacturing capacities to meet domestic as well as foreign demand
 higher rate of return on equity investments in the face of decline in interest rates on
deposits

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