The primary market remained dull during March 1999. The total resource mobilisation which was as high as Rs.870.93 crore in February 1999, fell to Rs.439.95 crore in March 1999 reflecting a fall of 49.5 per cent. When the position in March 1999 is compared to the level of capital raised in March 1998, there was a decline of more than 11 per cent. However taking the full financial year of 1998-99 the resources mobilised from the primary market witnessed a rise of 22.2 per cent at Rs.5586.46 crore compared to Rs.4569.95 raised during the previous year. This augurs well with the economic fundamentals in the economy. The economic growth is estimated to have risen by about 5.8 per cent and the inflation rate has been coming down. There is a downward trend in interest rate structure. These developments should have encouraging impact on the perceptions of investors. The fiscal incentives for investment in mutual funds and reduction in capital gains tax alongwith lower interest rate structure may have further favourable impact on the capital market. It may be stated that more than 80 per cent of capital raised during 1998-99 has been on account of financial institutions which shows increased level of intermediation in the capital market.

The secondary market recorded steep rise in equity prices during the first half of March 1999 as Sensex rising from 3523.98 on March 1,1999 to 3784.11 as on March 9, 1999 gaining 260 points. The BSE sensitive index closed at 3783.71 on March 15, 1999 showing a continuous rising trend and thereafter it moved either way closing at 3739.96 on March 31, 1999 recording a rise of more than 6 per cent over the month. The increase was notably higher in case of Jr. Nifty at 11.7 per cent rising from 1852.80 on March 1, 1999 to 2069.20 on March 31, 1999. The secondary market, however, witnessed a larger volatility which increased from 1.70 per cent in February 1999 to 1.83 per cent in March 1999 for Sensex but in case of Natex, S&P CNX Nifty and CNX Jr. Nifty there was a marginal decline in volatility.

The primary capital market is expected to perform better as mutual funds have been given substantial fiscal incentives for investing in equity capital. The budget for 1999-2000, has proposed to exempt the income of unit holders received from UTI or from mutual funds from income tax. It has reduced tax rates on long-term capital gains in regard to shares and securities from 20 per cent to 10 per cent for domestic investors. In addition to these measures, reduction in interest rates following the announcement of RBI to cut repo rate by 200 basis points, Bank Rate by 50 basis points and Cash Reserve Ratio by 50 basis points would ease liquidity constraints in the financial system and it may help primary as well as secondary market. However, during April-February (1998-99) there has been a net outflow of Rs.1203.92 crore from mutual funds.