In 2011, less will be more on the Indian stockmarkets. In 2001, it already is. Intrigued? Eleven years back in 1991, there were 2,471 companies listed on 23 Indian exchanges; 500 of these were traded actively.

A year back, in 2001, there were 5,937 companies listed on the bourses, but less than 150 of them were traded actively. And only two exchanges mattered, National Stock Exchange, and Bombay Stock Exchange; most other exchanges were doing no business at all.

So, in 2011, the pink brigade, India's financial press, will have to find something else to fill up the two-pages-and-plus stock quotes now do; quotations will likely be limited to a single column as the number of companies whose stocks are traded actively will fall.

There will also be fewer exchanges in India. As events of the past few years have shown investors and companies will both prefer national exchanges.

Trading, as the market-wise will tell you, moves to markets that are liquid; thus, the smaller exchanges will wither away. And in the final strand of the less is more tapestry, the cost per transaction for investors will decrease as trading volumes, and the number of intermediaries increase.

By the turn of this decade 24-hour stock exchanges will come into being. Investors in India can trade in blue-chip securities from around the world. And BSE or NSE being the target of a friendly acquisition by an international exchange is certainly within the realm of the possible.

Today's leaders, in terms of market capitalisation, may not be around in 2010. Of the thirty scrips that constitute the Dow Jones Industrial Average (of the NYSE), only one has survived 100 years, General Electric. Only five of the London Stock Exchange's ft30 have survived 64 years. And just 74 of the first S&P 500 remain.

Neither size nor ancestry is any indication of a company's ability to survive and thrive. The 1990s was-despite the great software slowdown of 2001-02-the decade of India's software services companies. The scrips of none of today's software majors that populate the day's list of the most valuable companies in India were considered hot at the beginning of the 1990s.

The 2000s-although the first two years of the decade have been washouts-could end up being the decade of the next big thing in India. That could be healthcare. Or it could be biotechnology. And, more in hope than in expectation, 2011 should see Indian stockmarkets being policed by a far more professional regulator.

Stockmarkets the world over are volatile-and some of the excitement of stock-picking will die if that were to change-but most first-world bourses are free of the kind of scams Dalal Street has seen. A huge punting population doesn't help, but surely, a strong regulator, which has the bite to back its bark, should help. That again is in keeping with the less-is-more leitmotif. Less scams. And more powers to the regulator.

Do We Need A Tech Exchange In India?

Tech stocks drive the market, but a tech exchange may be premature

A dash of numbers to begin with: between 20 and 25 per cent of the trading on d-street on any given day is in information technology stocks. Now, to matters concerning the Nasdaq, which opened shop in 1971. Over the past 30 years, it has facilitated the raising of capital by thousands of firms, many of which have grown from garage start-ups into multinational behemoths. If it's names you want, then Apple, AOL, and Netscape should suffice.

Given that, a separate tech exchange in India sounds great. But what about Over The Counter Exchange of India (OTCEI)? Incorporated in 1990, OTCEI, with its easier listing norms, was supposed to help entrepreneurs raise capital. A decade after its creation, though, OTCEI hasn't engendered any heavy-weights. Nor has it gained a critical mass in terms of turnover (Rs 96 crore in 2001) or listings (all of 115 companies).

Will carving out a tech exchange from NSE and BSE help? Not quite, says U.R. Bhat, Chief Investment Officer, Jardine Fleming Asset Management India. ''We will end up fragmenting the Indian stockmarkets further.'' If one were to subtract the trading volume accounted for by new economy stocks like those belonging to technology or pharma companies from Indian exchanges, the balance wouldn't be anything substantial. Scrips in sectors like cement, steel, FMCG, banking and petrochemicals alone cannot make for a vibrant trading scenario. Even the argument about a separate tech exchange in India attracting start-ups from other parts of the world (if such a listing were allowed by regulations) doesn't hold water: these companies will probably list on the Nasdaq or the techmark, given their deep pool of capital and sophisticated international investment communities available at these exchanges.

-Roshni Jayakar

The Stock Exchange Regulator Of The future

Sebicop: the regulator of the future

Can SEBI transform itself into a super-regulator capable of overseeing fairness and transparency in a stockmarket that will boast a myriad innovative trading instruments and increased trading volumes?

The surprising answer to that q is that it can. Only it can no longer rely on self-regulatory organisations (SROs) such as stock exchanges to regulate the markets. After all, the track record of the stockmarkets in India shows that SROs haven't really been effective. SEBI even had to take the extreme step of dismissing the entire board of directors of BSE in March 2001 when allegations were raised over office-bearers using their positions to access sensitive information.

The solution could lie in moving towards the UK model of financial regulation. In 1997, the United Kingdom scrapped its regulatory structure-this was instituted in the wake of the Big Bang of 1986-which essentially took the form of a string of SROs under the aegis of the Securities and Investment Board (SIB). Today, the country boasts a Financial Services Authority (FSA) that regulates not just the securities market, but also the banking and insurance sector.

A regulator like the UK's could make sense in the future Indian context where financial services companies will operate across securities trading, banking, and insurance. Only a super-regulator, like the FSA, overseeing all sectors can ensure fairness and transparency. But even if India were to follow the American or French model-separate regulators for each of these sectors-the regulator will need to possess formidable investigatory powers, much like the sec, and be able to levy substantial fines for infringements. The catch with multiple regulators? The story of the run on Madhavpura Mercantile Co-operative Bank in 2001-co-operative banks have dotted-line regulatory relationships with the Reserve Bank of India and the State Registrar of Co-operatives-holds the answer.

-Roshni Jayakar

The Sensex In 2010

Where will the Sensex be in 2010? That question seems foolhardy, especially in light of the fact that market mavens are, at this point in time, not too keen on putting their names to predictions on the index's position six months down the line. Still, the past behaviour of the Sensex and its link to GDP (however tenuous) does provide a mathematical basis for putting a number to the Sensex's whereabouts in 2010.

The best year for the economy this last decade was 1995-96. The GDP, at Rs 10,73,300 crore, grew 7.3 per cent during the year. The market capitalisation of the BSE in 1995-96 was 43 per cent of the GDP. And the Sensex grew by 27 per cent, touching a high of 3,598.37. The year also witnessed record investments of $3.05 billion by foreign institutional investors (FIIs).

Now for the future. If the GDP manages to grow at a real rate between 6 per cent and 7 per cent over the next few years, the economy's vanguard industries like infotech, pharma, biotech, banking, cement, even FMCGs, will grow much faster. The Nasscom-McKinsey study, for instance, expects the infotech sector to grow at 35 per cent over the next seven years. And the FMCG business could grow at over 20 per cent if minor issues related to penetration are sorted out.

The composition of the Sensex in 2010 will, as one would expect, be different: companies from the infotech, pharma, biotech, and petroleum domains will dominate. And the weightage given to the FMCG sector, 29 per cent now, will undoubtedly come down.

Finally, if the stockmarket were to perform in the next decade as it did in the last, growing at the rate of 22 per cent a year, the Sensex should double every four years. Thus, if we take the Sensex at 3,500-levels in January 2002 as the equilibrium, it would stand at 14,000 by 2010. Whoa!

-Roshni Jayakar