Markets hold firm as govt talks up investor sentiment

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Mumbai, New Delhi, Sep 30: As the shockwaves of the global financial crisis originating in the US hit markets across the world, India’s financial sector regulators are meeting on Wednesday in the country’s financial capital Mumbai to review the global situation and to firm up the government’s plan of action in the wake of rising uncertainty.

Speaking from Marseilles, Prime Minister Manmohan Singh underscored the government’s seriousness by saying, “Our value markets are opened to the world and if they are affected, this will affect our capacity to finance our development.”

The high-level coordination committee on financial markets will assess the impact of deepening financial crisis and the Bush administrations rescue plan on the Indian financial system. Officials familiar with the matter said the committee could also take up some policy issues aimed at attracting capital inflows and restoring investor confidence.

High on the Centre’s list of priorities is raising the cap on FII investment in the government and corporate debt markets, besides opening up the economy to other forms of inflows. At present, FIIs can invest a at most $5 billion in government securities and up to $3.5 billion in corporate bonds. In contrast to the equities market, FIIs have been net investors in the debt market this fiscal.

Officials said the panel would also debate whether regulations relating to the issuance of participatory notes need alteration. Markets regulator Sebi is expected to announce the draft review on P-notes after its board meeting on October 6, a senior official said.

The coordination committee, which deals with inter-regulatory issues in the financial and capital markets, is chaired by RBI governor D Subbarao and comprises Sebi chairman CB Bhave, Insurance Regulatory & Development Authority chairman J Hari Narayan, Pension Fund Regulatory & Development Authority chairman D Swarup and department of economic affairs secretary Ashok Chawla. In the capital, finance minister P Chidambaram sought to allay concerns stating that “the regulations that are in place are adequate” and that if they need to be tweaked, the Centre will do so. “There is nothing to worry about the Indian market. We are suffering the consequences of turbulence around the world,” he said.