5.2 Primary Market

As already mentioned, the first big bang reform in the capital market was the abolition of
capital issue controls and the introduction of free pricing. Some elements of merit based
regulation still survived in terms of track record requirements (entry norms) and an invidious
distinction between premium and par issues. Over time, however, these have also been
whittled down and the capital market regulator has moved almost completely to a disclosure
based regime of regulation.
The introduction of the book-building route has led to greater efficiencies in the capital
raising process and has contributed to improved price discovery. At the same time vast© Centre for Civil Society, http://www.ccsindia.org. All Rights Reserved.
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improvements in the disclosure regime discussed later in this paper have laid the foundation
for a more transparent primary market.
There is still an element of dirigisme in the attitude of SEBI towards new financial
instruments. It was only recently that SEBI allowed non investment grade bonds to be issued
and it even now frowns on instruments like equity index linked bonds.