The Mumbai branch of Morgan Guarantee Trust Company of New York will also be inaugurated on Thursday. The Global Investment Bank is investing $50 million in the twin ventures.

JP Morgan, which teamed up with term-lending institution ICICI in I-Sec and another asset management company quit the joint venture last year to set up its own shop in India.

JP Morgan Securities India, the primary dealer firm, will be in direct competition with I-Sec, the investment banking arm of ICICI in which the Global Investment Bank had held 40 per cent stake till last year. The other prominent primary dealers are Securities Trading Corporation of India and Discount & Finance House of India.

Unfazed by the state of affairs in the capital markets, JP MorganSecurities managing director Nicolas S Rohatyn said: "The Indian market is vast with a lot of depth. The crucial factor would be the pace of economic reforms. We have a long-term perspective."

Morgan Guarantee Trust Company has been engaged in investment banking and treasury operations. The company received the Reserve Bank of India clearance to commence its banking operations last year.

"We are not into retail banking. The focus is on advisory services and cross-border investment-oriented business. Investment banking is one area where we have significant competitive advantage. We are active in the energy and information technology sectors," said Morgan Guarantee Trust Company's country head Dominic Price.

The JP Morgan-Williamson Magor venture's entry into the government securities market will trigger stiff competition among primary dealers, money market analysts said. The RBI had recently given an in-principle approval to about ten new entities including satellite dealers to function as primarydealers. These include Kotak Mahindra Capital, JP Morgan Securities, Ceat Financial, DSP Merrill Lynch, Tata Finance and ABN Amro Securities. So far JP Morgan will be the first off the block.

PDs can route transactions in the call money market up to the tune of Rs 3 crore while satellite dealers are not allowed to play in the call money market. The RBI provides primary dealers liquidity support through refinance against security of holdings in Subsidiary General Ledgers.

This was followed by the modification in payment of underwriting fee to PDs in August 1998 where the commission is directly linked to underwriting commitments. It has also recently allowed them to raise Tier II capital to meet capital adequacy ratio standards.

"Our objective in India will be to enlarge the market. We will work in close co-operation with the Reserve Bank, the regulator, to expand the market," said Rohatyn.