Indian Journal of Economics and Development

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Development of Equity Capital Market for MSMES in India:An Econometrics Perspective


Affiliations
1 K.E.T.’s V.G. Vaze College of Arts, Science & Commerce, Mumbai-400081, India
 

Objectives: To assess the state of SME equity capital market in India and to assess the impact of international SME equity markets on Indian SME market

Method/Statistical Analysis: In order to assess the state of SME equity market in India, its performance has been compared with the performance of international SME equity markets. For this purpose information on stock indices of different SME equity stock indices have been sourced for the period October 1, 2012 to March 31, 2017. Moreover, the ratio of number of companies listed on the SME platform and the number of companies listed on the main exchangehas been used as a tool for measuring the depth of an SME trading platform. For studying the interaction between the Indian SME stock market and the international SME stock markets, the Autoregressive Conditional Heteroscedasticity Mean (ARCH-M) model has been employed.

Findings: The study reveals that since its inception in the year 2012, the BSE SME market has been able to make a mark for itself. During the reference period, the performance of the market is impressive and much better compared to other international SME equity capital markets. However, international SME equity capital markets are more entrenched than the Indian SME equity capital market as measured by the ratio of number of companies listed on the SME platform and the number of companies listed on the main exchange. Regarding the interaction between the Indian and International SME equity markets, we ascertained that while volatility in Kosdaq and Chinext have negative impacts, volatility in Mothers and TSXV markets have positive impacts on volatility in BSE SME market. Moreover the impact of other two SME equity markets like, AlterNext and FirstNorth on BSE SME are statistically insignificant. We also ascertained that the BSE SME market is a risky market and the findings are statistically significant.

Application/Improvements: Considering the fact that the BSE SME is in its initial years of growth and far from being mature and well entrenched, the policy makers in active coordination with the capital market regulator may take necessary steps in further deepening of the BSE SME trading platform. Further, it would be beneficial for the SMEs in India if the SME trading platform is developed as a multilateral trade facility (MTF) rather than as a regulated market. Sectoral analysis of companies listed on BSE SME can be an area of further research.


Keywords

Stock Exchange, SME Equity Capital Market, ARCH-M Model, ARCH Effect, GARCH Model, Volatility Clustering.
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Notifications

  • S. Shroff, S. Sengupta. SME exchange: transformation opportunities of SMEs. IOSR Journal of Business and Management. 2016, 1-5.

  • Harwood, T. Konidaris. SME exchanges in emerging market economies: a stocktaking of development practices. Finance and Markets Global Practice Group of World Bank Group. 2015.

  • Rai, Sunita. Issues and challenges in promoting SME exchanges amongst MSMES in MAHARASHTRA. 2015.

  • O. Arce, E. Lopez, L. Sanjuan. Access of SMEs with growth potential to the capital markets.

  • Comission National Del Mercado De Valores (CNMV) Research Statistics and Publication Department. 2011, 1-52.

  • World federation of exchanges releases research paper on SME markets. The World Federation of Exchanges. 2016.

  • MCX-SX and Small and Medium Business Development Chamber of India.Meeting Financial and Risk Management Challenges of Small and Medium Enterprises.


Abstract Views: 235

PDF Views: 148




  • Development of Equity Capital Market for MSMES in India:An Econometrics Perspective

Abstract Views: 235  |  PDF Views: 148

Authors

Nihar Ranjan Jena
K.E.T.’s V.G. Vaze College of Arts, Science & Commerce, Mumbai-400081, India
Lina R. Thatte
K.E.T.’s V.G. Vaze College of Arts, Science & Commerce, Mumbai-400081, India

Abstract


Objectives: To assess the state of SME equity capital market in India and to assess the impact of international SME equity markets on Indian SME market

Method/Statistical Analysis: In order to assess the state of SME equity market in India, its performance has been compared with the performance of international SME equity markets. For this purpose information on stock indices of different SME equity stock indices have been sourced for the period October 1, 2012 to March 31, 2017. Moreover, the ratio of number of companies listed on the SME platform and the number of companies listed on the main exchangehas been used as a tool for measuring the depth of an SME trading platform. For studying the interaction between the Indian SME stock market and the international SME stock markets, the Autoregressive Conditional Heteroscedasticity Mean (ARCH-M) model has been employed.

Findings: The study reveals that since its inception in the year 2012, the BSE SME market has been able to make a mark for itself. During the reference period, the performance of the market is impressive and much better compared to other international SME equity capital markets. However, international SME equity capital markets are more entrenched than the Indian SME equity capital market as measured by the ratio of number of companies listed on the SME platform and the number of companies listed on the main exchange. Regarding the interaction between the Indian and International SME equity markets, we ascertained that while volatility in Kosdaq and Chinext have negative impacts, volatility in Mothers and TSXV markets have positive impacts on volatility in BSE SME market. Moreover the impact of other two SME equity markets like, AlterNext and FirstNorth on BSE SME are statistically insignificant. We also ascertained that the BSE SME market is a risky market and the findings are statistically significant.

Application/Improvements: Considering the fact that the BSE SME is in its initial years of growth and far from being mature and well entrenched, the policy makers in active coordination with the capital market regulator may take necessary steps in further deepening of the BSE SME trading platform. Further, it would be beneficial for the SMEs in India if the SME trading platform is developed as a multilateral trade facility (MTF) rather than as a regulated market. Sectoral analysis of companies listed on BSE SME can be an area of further research.


Keywords


Stock Exchange, SME Equity Capital Market, ARCH-M Model, ARCH Effect, GARCH Model, Volatility Clustering.

References