Steps to boost stock markets

By Sushma Ramachandran

NEW DELHI, SEPT. 17. With the stock markets tumbling in panic response to the world wide meltdown and the rupee reaching record lows against the dollar, the government is considering steps to infuse liquidity into the capital markets. The Finance Minister, Mr. Yashwant Sinha, declined to comment on the situation in a bid to avert further panic reaction on the markets but a spokesperson said several measures are being considered to raise the investment limit for foreign institutional investors (FIIs) and allow margin trading.

On the rupee, however, the government did not react though it reached a record low of 47.85 to a dollar at the close of trading today. The rupee crashed the psychological 48 barrier during the day, touching 48.45 at one stage but recovered ultimately to end at below the 48 mark.

The panic in the financial markets is clearly in response to the global reaction to the terrorist attacks in New York and Washington as well as to expectations that the opening of the New York Stock Exchange today would lead to volatility in the international bourses. Highlighting this point, the Finance Minister insisted that he did not want to say anything in the difficult situation as there was already too much panic. `` I do not want to be misquoted and increase the panic,'' he said.

A Finance Ministry spokesperson, however, disclosed that the Government is likely to hike the investment limit for FIIs and allow margin trading to boost market sentiment. She clarified that the level of increase in the investment limit has not yet been decided though recent reports have indicated that it may be raised to 74 per cent.

As for margin trading in the stock markets, she said it might be allowed in order to infuse liquidity and prevent the market from crashing. In addition, there was a proposal to strengthen the market regulator, the Securities and Exchange Board of India. The government may also relax the 5 per cent limit of creeping acquisition to allow companies to buy-back their shares and ensure there is no drastic erosion in share values.

Indications are there will be a meeting tomorrow of SEBI and the Reserve Bank of India to finalise these measures. The Government's move to halt the slide in the capital markets comes even as stock markets all over the country witnessed heavy selling by the institutional investors fearing a potential U.S. military action against Afghanistan. The markets were also reacting to fears of a huge oil import bill. The Bombay Stock Exchange's sensitive index closed at 2680.98, a loss of 149.14 points, though it had crashed by nearly 200 points during the day to reach an eight year low.

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Section  : Business
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