“India is a globalised economy. The policy decisions in the US, European Union and other emerging nations have bearing on the Indian economy as well. The gradually recovering US economy has threatened to taper its quantitative easing programme thereby causing flow of foreign capital from emerging markets to the US”, said Ms. Deepa Aggarwal, Head – Corporates and Insurance Companies Business Development, National Stock Exchange of India Limited during a seminar on “Currency Hedging and SME Listing at the Exchange” organized by All India Association of Industries, MVIRDC World Trade Centre Mumbai in association with National Stock Exchange of India Limited.
Enumerating on the consequences of the outflow of foreign capital from India Ms. Aggarwal said that the Rupee rapidly depreciated following announcements by the Fed to taper quantitative easing. However, it was the formal currency markets that were blamed for generating volatility in the Rupee.
Ms. Aggarwal clarified that currency markets merely offer a formal trading platform for hedging currency risk. Before the existence of currency markets trading in currency forwards had limited transparency on pricing. Also, individual proprietors, exporters and MSMEs did not have access to currency markets. Currency Futures and Options are an asset class available to all with Price Transparency as an effective instrument to hedge against volatile currency movements. As per the SEBI rule currency futures trading is permitted in standardized contracts of USD/INR, EUR/INR, GBP/INR and JPY/INR while currency options may be traded in USD/INR.
Also, Ms. Aggarwal updated the audience of the recently launched NSE Bond Futures which is an effective hedge against interest rate uncertainty.
Further, Ms. Khyati Shah, Chief Manager, National Stock Exchange of India Limited enlightened the audience on SME Listing on Exchanges. SMEs lack access to formal credit institutes such as banks due to lack of effective collateral. Also, SMEs cannot be listed on the Main Board of NSE due to limited paid up capital. However, research studies indicate that SMEs hold high growth potential. Thus
NSE has formed an SME board for SMEs with paid up capital less than 25 crores to enable access to equity markets.
The SEBI has simplified compliance norms for the SMEs. The basic mandatory norms include three years of track record with atleast two years of profitability and positive networth. Thus the SME Board is an ideal platform for small growing companies to raise capital from equity markets, Ms. Shah noted.
Ms. Ritika Anurag, Assistant Manager – Financial Institutions Group, National Stock Exchange Limited proposed the vote of thanks.
January 21, 2014