Overseas investors may make Asian markets volatile: Sebi

Market regulator Securities and Exchange Board of India on Friday cautioned Asian economies about the possibility of volatility in their markets due to decisions of "certain categories of investors from matured markets", a trend faced by India and other countries in the region of late.

"There are certain categories of investors from the matured markets, where returns are not as good as in the past... So for greater pastures they have landed in our backyards because our markets give them good returns... They will abandon our markets if they (markets) don't give them good returns... This will lead to volatility in our markets," Sebi Chairman M Damodaran said at a conference in New Delhi.

Addressing the conference organised by the Asian Securities Analysts Federation, Damodaran said market regulators cannot have knee-jerk reactions to the developments in the markets and will have to make rules and principle-based regulations to avoid any systemic risks.

The Sebi chief's remarks assume importance since India and other Asian countries have been witnessing increasing volatility in the markets of late. The Indian equity market benchmark Sensex has lost close to 1,400 points in the past six straight sessions till Thursday.

Market analysts attributed the behaviour to developments in the US and hardening of crude oil prices.

Had the Asian markets been more integrated with global markets, the impact of happenings elsewhere would have been more, Damodaran said.

Pointing out that some of the Asian markets are great playgrounds where insider information is disproportionately present and used, the market regulator called upon analysts to have and industry code for objective and fair assessment of stocks.

Damodaran said Asian markets, particularly India and China, cannot gloat over the fact that their economies continue to grow at fast pace and must put in place risk management systems to see that markets function in orderly and sustainable manner.

"We cannot sit back on our weaknesses... We have to build on our strengths... We have to put in place practices that are better suited to our markets at present," he said.

He said that world over, investors are not given the kind of attention they deserve despite the fact that they are most critical to the markets.

However in India, Sebi and the government have decided to make investors education the top priority in 2008, he said.