The small and medium cap segments in India hold immense potential for lucrative returns. Despite this, small and medium cap stocks suffer from poor liquidity, low investor patronage and inadequate exposure. In this context, the proposal for IndoNext, a separate trading platform for these scrips, holds immense potential.
Financial
markets across the globe are choosing a path of integration.
In the Indian stock markets, integration is the result
of a necessity, not a choice. The 21 Regional Stock
Exchanges (RSEs) in the country have been witnessing
an ominous situation of zero trading volumes for several
years and are now virtually defunct. As a result, in
a final bid for survival, they have now unanimously
agreed to establish the IndoNext, a common trading platform
for small and medium cap companies with a capital base
of up to Rs. 20 cr.
In
2002, the 21 RSEs together accounted for a meager 3.84%
of total stock turnover in India (with 11 out of the
21 recording zero turnover) while the big brothers,
NSE and BSE, took the lion's share of the Indian stock
market pie. This virtually left the RSEs gasping for
breath. They tried a number of strategies to reinvent
themselves, including the establishment of subsidiaries
and the setting up of Inter-connected Stock Exchange
of India (ICSEI).
The
subsidiaries allowed members to trade on the two big
bourses and, thus, kept the RSEs afloat. However, they
were, in effect, like large brokerage houses, only with
a stock exchange-lineage. Their long-term viability
was questionable as their existence would become illogical
once the parent RSEs themselves cease to exist.
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