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Sebi asked to look into market rally
P Vaidyanathan Iyer in New Delhi | July 04, 2003 12:06 IST
The sharp rise in stock indices in May-June 2003 and the Bombay Stock Exchange Sensex piercing the 3,600 mark have not gone unnoticed by the finance ministry.
Not willing to take any chances, the ministry has directed market regulator Securities and Exchange Board of India to check whether the rise in the Sensex is in tune with the fundamentals of the economy.
The Sensex has risen by over 600 points, or 20 per cent, in the last two months. While it hovered at less than 3,000 points in the end of April, it crossed the 3,600-mark last week. Finance ministry sources said the capital market regulator had been asked to report its findings at the earliest.
With the monsoon session of Parliament slated for July 21 and Assembly elections scheduled in five states, the finance ministry wants to ensure that there is no adverse fallout on small investors. It has, therefore, decided to focus on capital market-related issues.
The sources said Finance Secretary D C Gupta was slated to hold meetings related to capital market issues in the next couple of days. Steps to sustain the buoyancy in the primary and secondary markets would be discussed, they added.
The finance ministry has also asked Sebi to look at the movement of the Sensex vis-a-vis other global benchmark indices. It will check whether the fundamentals of the companies justify the sharp increase in their scrip prices. Sudden spurts in market indices had to be monitored with the same seriousness as drastic declines in share prices, the sources said.
Automobile, banking and steel companies had witnessed a sharp increase in their share prices. The response to the Maruti initial public offering also buoyed market sentiments, with several public sector scrips touching 52-week highs.
In a letter written to Sebi recently, the finance ministry also asked it to scrutinise instances of malpractice in the market in the last couple of months. The regulator is expected to revert to the ministry on the action taken by it against stock market offenders.