New Delhi: Foreign Institutional Investors (FIIs) were not behind the recent fall in stock markets and there was no proposal to either ask them to withdraw from Indian market or ban them, Finance Minister P Chidambaram said on 4 March.
“I do not think that FIIs trading in stock market are the reason behind volatality (in stock markets) on certain days,” he said replying to supplementaries during Question Hour in the Rajya Sabha.
The ups and downs in the stock markets depend on the changing perceptions of investors — domestic and overseas, retail and institutional — about the economy, the sector and the company.
“The recent fall in the stock markets is attributed among other factors, to the sub-prime mortgage crisis in the US, change in the monetary stance of developed countries, the expected recession in US (and) firming up of oil prices.”
FIIs share in the Indian market continues to be small, the Finance Minister said adding sectoral and company specific caps over FII investment. There is, however, no “proposal to ask FIIs to withdraw or ban FIIs.”
While the benchmark Sensex fell 7.4% on 21 January, it rose 34.5% during this fiscal on a point-to-point basis from end of March 2007 to end of February 2008.
“The authorities do not try to manage or control movement of stock indices,” he said. Besides, capital market regulator Sebi maintains a constant vigil in the market, and in case of any abnormality, takes appropriate action against the concerned entities.
Chidambaram said systems and practices have been put in place to promote a safe, transparent and efficient stock market and to protect market integrity.
The systems instituted include advanced risk management mechanisms comprising on-line monitoring and surveillance, various limits on positions, margin requirements and circuit filters.
“The systems and practices are reviewed continuously and modified to meet emerging needs,” he said.
Measures taken to broaden and deepend markets include screen based trading system, dematerialization of securities, corporatization and demutualization of exchanges, settlement through clearing corporation and trading in of derivatives.