Finance ministry officials said Gandhi disclosed that the foreign institutional investor (FII) had to transfer a whopping Rs 300 crore to Thailand on an emergency basis to take care of "certain redemptions" and the unloading of shares in India was connected to this development.

Gandhi also clarified that Morgan Stanley had at no point of time wanted to deliberately take advantage of the UTI crisis to book short-term gains. He reiterated the FII's faith in the Indian capital markets, particularly with respect to the US-64 scheme. He went on to add that his company had a vested interest in ensuring healthy development of the Indian capital markets as his mutual fund has invested heavily in equities.

The North Block hadaccused Morgan Stanley of deliberately pushing down the markets between October 5 and 7, forcing all-round bear hammering in the aftermath of a formal announcement of erosion in the value of the US-64 scheme.

Gandhi had earlier met SEBI chairman D R Mehta to explain his position with respect to the sale orders spread over October 5-7. Sources said that the ministry seemed satisfied with the response given by Morgan Stanley. It, however, made it abundantly clear that FIIs would not be allowed to take the capital markets for a ride by wilfully manipulating the markets.

The behaviour of FIIs also figured in the meeting between Mehta and Kelkar here on Wednesday. An informal mechanism is expected to be evolved by the markets regulator to ensure that bear hammering by FIIs, of the kind noticed in the aftermath of the UTI crisis, does not occur again. The SEBI chief has already had a round of discussions with FIIs and more such interactions are likely to follow in the future.