Business

Indian stock market safe: FM

NEW DELHI: Even as the ripple effects of the U.S. financial turmoil appeared to develop into a tsunami across the globe following a ‘hitch’ in the $700-billion package to bail out sinking American credit institutions, Finance Minister P. Chidambaram, in concert with Securities and Exchange Board of India Chairman C. B. Bhave and the Reserve Bank of India, on Tuesday sought to calm panic-stricken investors and succeeded in talking up the stock market.

Emerging from a high-level meeting with the stock market regulator along with his top officials, Mr. Chidambaram said: “There is nothing to worry about the Indian market. We are suffering the consequences of turbulence around the world. Basically, the Indian market is a sound, attractive and well-regulated market”.

The rearguard action by the authorities, coming a day after the U.S. House of Representatives blocked the life-support package for Wall Street, not only stemmed an opening free fall on top of the over 500-point slump on Monday in the Bombay Stock Exchange (BSE) in tandem with other global bourses but also helped it close in positive territory.

Although Mr. Chidambaram’s assurance to nervous investors brought about some stability in the bourses led by banking stocks which had earlier nosedived in the wake of rumours and uncertainties over ICICI Bank’s liquidity position, Prime Minister Manmohan Singh in a broader note of caution pointed out in Paris that the current turmoil affecting developed countries could spread to the rest of the globe.

“We live in an interdependent world and the fate of all countries related to the international financial system. Our value markets are opened to the world and, if they are affected, this will affect our capacity to finance our development…if the financial crisis causes a recession in the main economies, this will compromise our exports,” Dr. Singh said.

Back home, at his meeting here with the SEBI Chairman, Mr. Chidambaram reviewed the functioning of the capital market which had plummeted in the wake of the U.S. financial crisis. Noting that the Government was constantly monitoring the situation and adequate regulations were in place, he said that if “the regulations are to be tweaked, we will do so,” for the smooth functioning of the market.

As for the foreign institutional investors (FIIs) withdrawing from the stock market, Mr. Chidambaram said: FIIs are selling, but I do not think all FIIs are selling nor do I think they are selling all the time.” They are selling because they have got payment obligations in other markets, he said.

On the rejection of the bailout package by the U.S. House, Mr. Chidambaram said: “The bailout package is a concern of the U.S. Congress and the U.S. Government. It is agreed by everyone that bail-out is necessary. How the Congress will reconcile to the views of the two major political parties, it is not for me to comment…Of course, we will be greatly helped if a bail-out package is quickly approved by the U.S. Congress.”

Mr. Bhave also told newspersons that there was no need to panic as stringent action would be taken against those found violating short-selling regulations.

The Indian market, he said, was resilient and the clearing system had proved its ability to deal with market fluctuations.

The clearing and settlement mechanism of the stock exchange “has been tested in times of great volatility,” he said.

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