New Delhi, Sep 30 (IANS) India's domestic market is safe from the global economic turmoil, Finance Minister P. Chidambaram said here Tuesday, contradicting Prime Minister Manmohan Singh's statement to a French paper.
The domestic market is 'safe, sound and attractive', Chidambaram told reporters outside North Block, the seat of the country's finance ministry.
Chidambaram, who did not rule out government intervention, if required, to protect investors' interests, added: 'There is nothing to worry.'
The finance minister's assertion come on a day Prime Minister Manmohan Singh, on a two-day visit to France, was quoted by French daily Le Figaro as saying India was not immune to global financial upheavals.
'We live in an interdependent world and the fate of all countries is related to international financial system. Our value markets are open to the world and if they are affected, this will affect our capacity to finance our development,' Singh told the paper.
Taking a contrary stand, Chidambaram said: 'The Indian market is a sound, safe, attractive and well regulated market. The government is closely monitoring the situation. There are adequate regulations in place.'
He also dismissed concerns over foreign institutional investors (FIIs) withdrawing from the capital market. 'I do not think all of them are selling. Nor do I think they are selling all the time,' he said.
Chidambaram said FIIs would continue to buy as the 'Indian market is still very attractive and well regulated'.
The finance minister Tuesday held a series of meetings with senior ministry officials and advisors to discuss the current market situation.
He also met C.B. Bhave, chairman of market regulator Securities and Exchange Board of India (Sebi).
Earlier in the day, Bhave told reporters there was no need for imposing a ban on short sales as existing regulations were adequate to deal with any volatile situation.
'If evidence is found against any firm circumventing short selling norms, severest action will be taken,' the Sebi chief said to calm market jitters, triggered by reports that the US House of Representatives had rejected the Bush administration's $700-billion bailout plan Monday.
'Sebi is closely monitoring the situation and has verified with the stock exchanges that there are no settlement issues,' he said.
Bhave's attempts to pep up the market appeared to calm investor sentiments to some extent as the equities markets, after opening very weak, recovered and finished in the green.
He said existing regulations allowed only retail short sales and that too on a T+2 basis. That means if there is short sale, the trader will have to deliver within two days of the trade.
Thus, the scope for building up speculative positions was limited and no ban on short sales was called for immediately.
'If the situation demands, regulations will be reviewed and appropriate measures taken,' the Sebi chief said.
Also, at present, the rules regarding short sales by domestic or foreign investors require that if they short sell, they must do so by borrowing the stock on the stock exchanges.
Hence, again there is not much scope for building up speculative positions.
'At present, there are no volumes in the borrowing or lending markets,' Bhave said. 'Therefore, there is no concern that institutions may be short selling in bulk.'
Maintaining that the Indian equities markets were resilient and that there was no need for panic, Bhave said: 'The clearing system is capable of dealing with stock fluctuations. The clearing and settlement mechanism has been tested in times of great volatility.'
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