Calling for innovative steps to deepen the capital markets, the Economic Survey said on Friday the government is working on a series of regulatory overhauls to better safeguard the financial sector.
The pre-Budget annual report card on the state of the economy, which was tabled in Parliament on Friday, said the capital markets performed well in 2010, with a record quantum of funds raised in the primary market and the highest-ever levels being reached in the secondary market also.
The Survey said that record foreign inflows helped support the market, while "prudent regulations and institutions protected the economy from the recent global financial shocks and its dynamism is now leading the current recovery."
"Looking to the future, the twin challenges are to continue this progress on gradual financial reform and to modernise regulations and institutions to ensure its continued safety and stability," it added.
The Survey also called for innovative solutions to deepen the domestic capital markets and the role of non-bank institutions, especially in corporate bond and debt markets.
"The government and RBI have already begun a series of essential regulatory overhauls aimed at updating the modern legislation underlying financial markets and improving macro- prudential safeguards and institutions," it said. "We need to continue along this path," the Survey said.
"Broader and deeper financial
markets will be crucial for mobilising higher savings and intermediating them efficiently to finance higher investment and growth," it added.
About the robust fundamentals of capital markets, the Survey said the market started moving toward strong growth during 2010-11 after putting the worst behind it.
The markets witnessed Rs 46,701 crore (Rs 467.01 billion) worth of funds being raised through IPOs, FPOs and rights issues till November, 2010, in the current fiscal, as against Rs 46,737 crore (Rs 467.37 billion) in the whole of 2009-10.
The average IPO size was Rs 827 crore (Rs 8.27 billion), as against Rs 633 crore (Rs 6.33 billion) in the previous year.
Besides, assets being managed by mutual funds grew to Rs 6,65,282 crore (Rs 6,652.82 billion) as of November 30, 2010, from Rs 6,13,979 crore (Rs 6,139.79 billion) at the end of the previous fiscal. In the secondary market, the benchmark Sensex and Nifty indices grew by 17 per cent and 17.9 per cent, respectively, in the current fiscal till December, 2010.
The Survey said the markets grew by 18 per cent in the 2010 calendar year, helped by robust foreign investment and a resurgent domestic corporate sector.
The Sensex and Nifty recorded record high closing levels on Diwali (November 5, 2010) and the markets grew higher for eight straight quarters till the end of the last quarter.