GOVERNMENT OF INDIA
Ministry of Finance
DEPARTMENT OF ECONOMIC AFFAIRS
STARRED QUESTION NO *76
TO BE ANSWERED ON 20.11.2007
Kartika Saka Spurt in Stock Market Index.
SHRI RAJEEV CHANDRASEKHAR
Will the Minister of FINANCE be pleased to state:-
(a) whether Government have taken note of the recent spurt of stock market index due to abnormal flow of foreign capital in the Indian market;
(b) if so, the extent of foreign investment received in the country during the last three months ending 31/10/07 and the percentage thereof in the form of Participatory Notes; and
(c) the steps proposed to be taken by Government to ensure stability of the stock market and the protection of the small investors in investments in private equity?
(SHRI P. CHIDAMBARAM )
(a) to (c) : A statement is placed on the Table of the House
Statement referred to in reply to parts (a) to (c) of the Rajya Sabha Starred Question No. 76 regarding “Spurt in stock market index” raised by Shri Rajeev Chandrasekhar for reply on 20th November, 2007
(a) The movement in stock market indices is a function of the perceptions of investors – domestic and overseas, retail and institutional – about the economy, the sector and the company. This perception is influenced by many factors including the macro-economic environment, growth potential of the economy, corporate performance, domestic and international events, and market sentiments. Taking into account the turnover of Foreign Institutional Investors from October 2006 to October 2007 vis-à-vis the total turnover, an analysis done by SEBI reveals that there appears to be no causal relationship between foreign institutional investment and changes in the stock market index.
(b) Foreign investments by SEBI registered Foreign Institutional Investors during the last three months with the share of participatory notes (PNs) is as below:
Figures at the end of month of
Figures reported in the month of
No. of FIIs issuing PNs
Assets Under Management of FIIs (Rs. Cr.)
Notional Value of Underlying Indian Securities against which PNs have been issued (Rs. Cr.)
B as % of A
August – 07
(c) SEBI is keeping a constant vigil on the market, irrespective of the levels of the Sensex and has taken immediate action wherever warranted. SEBI and the Exchanges have put in place systems and practices to promote a safe, transparent and efficient market and
to protect market integrity. The systems include advanced risk management mechanisms comprising on-line monitoring and surveillance and various limits on positions, margin requirements, circuit filters, etc. which reduce the scope for excessive volatility in the market.