Ruling out a ban on FIIs saying their presence in the Indian stock market was not sizeable enough to affect it, Finance Minister P Chidambaram, on Tuesday, said they were not behind the recent fall in stock markets, which could be attributed to sub-prime crisis, expected recession in the US and firming up of oil prices.
“I do not think that FIIs trading in stock market are the reason behind volatility (in stock markets) on certain days,” he said replying to supplementaries during the Question Hour in Rajya Sabha. “FIIs investment is capped for different sectors by Sebi, and there was no proposal to ban them, nor to put any check on withdrawals by them,’’ he said.
Small share
FIIs share in the Indian market continues to be small, he said, adding that there are sectoral and company specific caps over their investment. There is, however, no “proposal to ask FIIs to withdraw or ban FIIs.” 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.
Moreover, Yen carry trade, the policy measures on offshore derivative instruments by the Sebi, the impact of primary market issues, relative variations in emerging markets etc also affected the Sensex behaviour, he said.
Mortgage crisis
“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 the US (and) firming up of oil prices.”
On Monday, Mr Chidambaram had said fall in share prices in India reflects happenings in the world markets.
“Asian markets have slipped because of fears of recession in the US, what is happening in India shows that we are not as decoupled as we think we are,” he had said.
While the benchmark Sensex declined by 7.4 per cent on January 21, it has risen by 34.5 per cent on a point-to-point basis from end of March 2007 to end of February 2008.
The Sensex on Tuesday closed 337.99 points down at 16,339.89. On Monday, it shed over 900 points.
