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'Why has the Sensex gone mad?'

August 08, 2005 17:44 IST

It was a question that irked Finance Minister P Chidambaram so much that he almost snapped at veteran MP Gurudas Dasgupta of Communist Party of India.

"Why has this senseless Sensex gone mad?" asked Dasgupta on the floor of the Lok Sabha on Monday during question hour.

No sooner had the question been asked that Chidambaram, in his trademark blunt style, retorted: "It (India) is one of the best regulated stock markets. I reject the charge. Just this morning I have spoken with the Sebi (Securities and Exchange Board of India) chairman about it. Sebi and the government of India are both carefully watching the situation. I reject the argument that a bubble is building."

Dasgupta raised the issue of the 'unusual bull run' on the Indian stock markets. He said that in 1992, when Manmohan Singh was finance minister, he had raised the same issue in Parliament (soon thereafter the stock markets had collapsed).

"Even when disaster struck Mumbai, the Sensex went up. When the tsunami hit India, the Sensex gained 100 points. In five days of August, Sensex rose by more than 500 points. Why is this happening?" asked Dasgupta.

"It (the stock market's dizzy rise) has nothing to do with economic fundamentals. The agriculture sector is deficient. The Planning Commission has said that growth rate will not be as much as expected earlier. Then why this bull run?" said Dasgupta.

"I have the answer," he then added, introducing an element of conspiracy into the matter.

"The Sebi is not enforcing rules. The government of India is sleeping. Speculators are being allowed to have a free run," Dasgupta went on.

"Hot money is fueling the market," he added.

Dasgupta's 'studied' intervention on such a sensitive economic issue even amused Speaker Somanth Chatterjee, who observed: "I never knew that you had such sound knowledge of the stock market too."

But Dasgupta just kept ploughing on. He saw a conspiracy of the government behind the stock market's dizzy rise. "The government is allowing hot money to run the market to give a false impression of good performance of the Indian economy," he said.

"I regret to tell the finance minister that this bubble may (soon go) bust," he added.

This incensed the finance minister. Chidambaram, without going into details, just rejected the charge, annoying Dasgupta. He stood up and told Chidambaram: "I refuse to accept your answer."

He then went on to criticize the "complacency of the finance ministry."

The Lok Sabha was witnessing yet another clash of ideologies.

Chidambaram's answer upset Dasgupta because he expected a 'logical answer' for the 'maddening Sensex.' But Chidambaram, despite his snappy reply, kept smiling throughout the exchange.

The fact that the Sensex fell by 148 points to slip to 7606 on Monday is of only academic interest.

Sheela Bhatt in New Delhi