Why India needs a “Bond Market” ?
Swelling capital inflows in the equity markets is concerning me a lot. The only comforting fact is that Rupee has not yet appreciated beyond the crawling peg range and it is still long way away form pre Lehman era of 39-40 levels against the Dollar. What concerns me is that the FII inflows have flooded the equity markets and there is no mechanism in place to channelize these robust inflows to key areas of the economy like infrastructure and other priority sectors. The markets are fair valued at these levels and any upswing or bullish run beyond these levels with create an asset bubble and overvalued assets. A well developed Corporate Bond Market would have been handy in these circumstances.
India lacks a well developed Corporate Bond Market and the fact we badly need one was highlighted by PM Manmohan Singh at the recently concluded Indian Economic Forum. Through corporate bonds FIIs can join the Indian party by investing in long and medium term assets both through direct and institutional investment. We need a mechanism to channelize these savings in the corporate and infrastructure sector particularly by having a very well lubricated and functional corporate, municipal and even local government and project bond market. We not only need fast track reforms to develop a functional bond market separate from government treasuries but need judicial reforms to speed up the process of justice in case of a default, delinquency or worst case scenario of a bankruptcy . Only when the judicial reforms guarantee some faith in the judiciary can a well structured bankruptcy code be developed and implemented, which is not less then a lifeline for investors in the bond market.
Swelling capital inflows in the equity markets is concerning me a lot. The only comforting fact is that Rupee has not yet appreciated beyond the crawling peg range and it is still long way away form pre Lehman era of 39-40 levels against the Dollar. What concerns me is that the FII inflows have flooded the equity markets and there is no mechanism in place to channelize these robust inflows to key areas of the economy like infrastructure and other priority sectors. The markets are fair valued at these levels and any upswing or bullish run beyond these levels with create an asset bubble and overvalued assets. A well developed Corporate Bond Market would have been handy in these circumstances.
India lacks a well developed Corporate Bond Market and the fact we badly need one was highlighted by PM Manmohan Singh at the recently concluded Indian Economic Forum. Through corporate bonds FIIs can join the Indian party by investing in long and medium term assets both through direct and institutional investment. We need a mechanism to channelize these savings in the corporate and infrastructure sector particularly by having a very well lubricated and functional corporate, municipal and even local government and project bond market. We not only need fast track reforms to develop a functional bond market separate from government treasuries but need judicial reforms to speed up the process of justice in case of a default, delinquency or worst case scenario of a bankruptcy . Only when the judicial reforms guarantee some faith in the judiciary can a well structured bankruptcy code be developed and implemented, which is not less then a lifeline for investors in the bond market.
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