Sensex recovers, Fin Minister not against PN

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New Delhi, Oct 17 (UNI) Stock market barometer Sensex bounced back from the day's low of over 1700 points after Finance Minister P Chidambaram today assured investors that the Government is not in favour of banning Participatory Notes (PN) used by foreign institutional investors (FII).

The PN is used to represent overseas investors not registered with SEBI.

''We are not in favour of banning participatory notes (PNs) and we have not banned PN notes,'' said Mr Chidambaram adding ''We have simply placed a cap on the proportion of money coming through PN notes vis-a-vis the total assets under management and the total derivative position.'' The Minister said, ''Investors through PN are certainly welcome to invest in India but for the present it is important to moderate these cap inflows,'' ''If some investor wishes to register in India as an foreign institutional investor (FII) and then invest, he is most welcome,'' he added.

Mr Chidambaram was speaking to reporters a day after the SEBI proposed in a paper that financial instruments such as PNs would be phased out over a period of time.

''The decision of the Securities and Exchange Board of India (SEBI) is to moderate the capital inflows into India.'' Mr Chidambaram noted.

''I want to assure all investors that what has been done are steps to moderate the capital flows which have become very copious and very abundant. This is a culmination of a long discussion between the SEBI, Reserve Bank of India (RBI) and the government, and the decisions that have been announced by SEBI are good decisions, good in the long term interest of the investors, good for the capital markets,'' he added.

The index, which reached a life-time high this week, crashed after the SEBI put up its suggestion late yesterday evening.

The PNs are said be behind the hugh surge in foreign inflows, which caused the latest market rally.

Mr Chidambaram said, ''I was surprised to see one or two alarmist statements on television last night and today morning. I think these statements are unfortunate. There is no need or place to make alarmist comments.'' He said, ''Market sentiment is not a function of inflows alone. It depends on other things also. Companies are announcing second-quarter results and those are robust. SEBI steps are in the interest of investors, brokers and the market.'' ''Inflows have an impact on rupee but inflows are also contributing towards a steep and sharp movement of the market,'' he said.

UNI

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