Market is safe, stay invested: FM tells investors

New Delhi, May 23: Asking long-term investors to stay invested, Finance Minister P Chidambaram today said the government and SEBI will ensure that the Indian capital remains well-regulated.

''Responsibility of the government and the regulator is to ensure that market movements are orderly,'' Mr Chidambaram said in a statement in the Rajya Sabha.

He said despite a sharp correction, the Indian stock market has risen by 133 per cent in two years between May 17, 2004 and May 22,2006.

''The secular rise in the last two years is attributable to the sound India growth story. In my submission, the India growth story remains intact,'' the Finance Minister said.

He assured Parliament that the calm has returned to the market after the government took measures like advising banks to provide adequate liquidity to the highly leveraged participants to meet the margin requirements.

Both the National Stock Exchange and the Bombay Stock Exchange have reported that the market players have met their payment obligations.

The Sensex today closed at 10,822 and Nifty closed at 2306 points. Nifty futures have shown an increase of 162 points over yesterday's close. During the entire week, the market for government securities and the foreign exchange markets have remained stable.

Mr Chidambaram said the market remains safe since it has undergone fundamental institutional reforms since 1992. Risk management systems comprise Clearing Corporation to assume counter party risk and provide delivery versus payment; on-line position monitoring and automatic disablement of trading members; index-based market-wide circuit breakers; dematerialisation and electronic transfer of securities and a robust margining system.

The Finance Minister said over the last one week, the events in the global markets, especially movements in the commodity markets, have brought sharp volatility to the stock markets in many emerging economies. Markets both in the developed world as well as in the emerging countries have seen sharp corrections. There has been a decline in Russia, China, Korea, Brazil and Indonesia.

He said Monday's crash was exacerbated presumably on the inability of some traders who were highly leveraged, to meet the margin calls within time.

However, with the banks coming to their rescue no payment default has been reported, he said.

UNI

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