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Rediff.com  » Business » Probe into Jan 22 market crash, if. . .

Probe into Jan 22 market crash, if. . .

Source: PTI
February 18, 2008 17:05 IST
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Any probe into the stock market crash of January 22, 2008, could be possible if there are some concrete evidences of lack of transparency and wrongdoings, concerned authorities are understood to have informed a Parliamentary panel on Monday.

The Parliamentary Standing Committee on Finance reportedly discussed market volatility on Monday, which was its second meeting on the issue.

Finance Secretary D Subba Rao reportedly told the Parliamentary Standing Committee on Finance that volatility is integral and inherent feature of the markets and there is no market failure on January 22 and preceding days, sources said.

However, if the panel viewed that there are concrete evidences of market failure and lack of transparency on those days, Rao said the authorities might look into those issues, according to sources.

On January 22, the Indian stock market suffered its biggest single-day fall, losing 1,408.35 points, on panic selling triggered by weak global cues.

The finance ministry is understood to have told the panel that no single cause could be attributed to such a fall in share prices. It was primarily caused by sub-prime mortgage crisis in the United States and Europe and net selling by financial institutional investors.

The standing committee will meet once again, before submitting its report to Parliament in the coming Budget session, slated to start from February 25.

At its first meeting on February 11, Securities and Exchange Board of India, Reserve Bank of India, UTI Mutual Fund, investors' associations and brokers' associations expressed their views.

At the next meeting, the date of which is yet to be fixed, the finance ministry would present its submissions in writing.

At the first meeting on February 12, most members of the committee, headed by BJP MP Ananth Kumar, were apparently satisfied with the reply of the Sebi, which is believed to have said that since Indian stock market is integrated with global markets, it cannot remain immune to the global volatility.

Members were understood to have sought steps to stop any cartelisation and high speculation in the market, apart from compulsory grading of public offers.

A presentation, made during that meeting, pointed out that 60-80 per cent of total terminals on the Bombay Stock Exchange and the National Stock Exchange went out of operation for some time on January 22, resulting in huge losses of Rs 25,000 crore (Rs 250 billion) to investors.

Another presentation also wanted to know the criteria behind pricing of IPOs. Recently, EmmarMGF, Wockhardt and SVEC withdrew their proposed IPOs, while Reliance Power IPO closed below its issue price on its debut.

Some members were also understood to have sought operationalisation of Investors Protection Fund under the aegis of SEBI at the earliest, as suggested by the Joint Parliamentary Committee, which probed the Ketan Parekh stock scam.

They also wanted an education campaign for investors by the Sebi and government to caution them against the volatile nature of the markets, according to the sources.

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