Buoyed by the booming capital market with BSE index crossing the 9000 mark, Finance Minister P Chidambaram on Friday said that he expected the market to rise further on the back of increasing investor and business confidence while maintaining that he was keeping a close watch on it.
"I expect the Sensex to rise. However, SEBI (Securities and Exchange Board of India) and I am watching the movement very carefully to see if there is any manipulation," he said replying to a question in the Lok Sabha.
"I do not worry and you should also not worry as long as the index movement is orderly. SEBI has assured me that the movement is in order," he said.
Allaying fears of any external forces active in the market to reap super normal profits, Chidambaram said, "All sectors of economy are doing well... business confidence is high... investor confidence is high... I expect the Sensex to rise."
Chidambaram, however advised small investors to be cautious while investing in the stock market. "Unless you have knowledge about a particular scrip you should be cautious. Or try to invest through mutual funds."
On the declining interest of small investors now compared to a decade ago, the minister said main reason was periodic scams in the stock market and the biggest set back was near collapse of Unit Trust of India.
"I think the government of the day took number of steps to improve their (small investors') confidence. My impression is that mutual funds are quite active in the markets meaning thereby that small investors are putting their money in the MFs."
"The underlying principle of the stock market is speculation. When there is manipulation, we shall intervene decisively," Chidambaram said.
"We are keeping a close eye on the price to earning (P/E) ratio. As long as they are within the acceptable limits, there is nothing to worry," he said.
The minister also attributed the Sensex movement to economic growth rate registered in the first half of the current financial year, which stood at 8.1 per cent. Obviously this adds to the impact over Sensex and one should be happy about the good news.