Retail investors have been pulling out of the Indian stock markets. Is it only because of the subdued economic condition that has impacted corporate earnings, and in turn, the stock prices? We believe this is not the only reason. Another major reason for the investors' wariness towards stocks has been due to mistrust of corporates. Investors have lost heavily by investing in companies with poor corporate governance, fraudulent behaviour, corruption, etc. Many promoters are also known to take decisions that may be detrimental to the interests of minority shareholders.
This seems to have worried the Securities and Exchange Board of India (SEBI). As a result, the market regulator has been trying to tighten norms to bring in more transparency in corporate dealings and to ensure protection of investors against malpractices. Here is one such move that the SEBI seems to be considering.
As per an article in The Economic Times, companies may now have to seek the approval of shareholders if they plan to divest stake in major subsidiaries. As such, companies may be mandated to disclose the financial performance of their subsidiaries, benefits from sale, consideration amount and the names of the parties involved. In addition, the market regulator also plans to mandate companies to disclose their policies on related-party transactions. If such steps are initiated and implemented correctly, we believe it will go a long way in reviving the trust of retail investors.
This seems to have worried the Securities and Exchange Board of India (SEBI). As a result, the market regulator has been trying to tighten norms to bring in more transparency in corporate dealings and to ensure protection of investors against malpractices. Here is one such move that the SEBI seems to be considering.
As per an article in The Economic Times, companies may now have to seek the approval of shareholders if they plan to divest stake in major subsidiaries. As such, companies may be mandated to disclose the financial performance of their subsidiaries, benefits from sale, consideration amount and the names of the parties involved. In addition, the market regulator also plans to mandate companies to disclose their policies on related-party transactions. If such steps are initiated and implemented correctly, we believe it will go a long way in reviving the trust of retail investors.
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