BSE -1,050.52 18,001.34 -5.84%

NSE -311.35 5,356.70 -5.81%

(The online Sensex graph of BSE is here)

Markets opened with a 10% down. It’s slowly recovering now. Everyone is anxious to know what’s more to happen!

I guess this was due. Though many had been waiting for the market to reach 20,000, much before Diwali ( a major Indian festival) and all thought it would but then we knew in which direction the wave was actually heading. Didn’t we?? 

On Tuesday, Bombay Stock Exchange’s Sensex ended 7 points lower at 19,051.86. National Stock Exchange’s Nifty ended down 2 points at 5668.05, making a high of 5708.35 and low of 5578.45.

And when we often asked ourselves : “Will the Sensex continue to rise at this fast pace? And will I profit from the Bull Run?” and the bullish that we are, SEBI shouts out another time.

Securities and Exchange Board of India’s (SEBI) proposal to tighten the rules for purchase of shares and bonds in Indian companies through the participatory note (PN) route, plunged the Sensex to 17,500 this morning crashing it. Nifty crashed by 500 points. The idea of SEBI is to stop the indirect investment by foreign investors on the stock markets which lead the Sensex rise from 15000 (our last write up to when it was 15,000 points, while in 3 months its 19,000 +).

Former NSE Chairman R H Patil said, “The market is being manipulated right now and a bubble was growing rapidly. Although the Sebi proposals are late, they would help avoid a greater disaster. It is very important to know the identity of foreign investors, who have been manipulating this market.”

And what’s more: Trading at the BSE had been haulted. This was last done on 2004 in the month of May.

Finance Minister says “SEBI’s action are a part to moderate the capital flows”
Investor is most welcome to register as an FII. These decisions are in the long run in the interest of investors”

Two school of thoughts have been arisen here

1. Government should not have done this:

Those who believe this school, say that why passion for capital control now?

2, Those who are happy : are because its a long term benefit.

What’s your view? Especially if you were a PN Holder!

And  what will the Government do if India still has billions being pumped in the country? (remember its last action on ECB’s)

{Participatory notes are derivative instruments which are issued by FIIs to foreign investors who like FIIs are not registered with SEBI but want an exposure to Indian equities. Foreign investors who want to trade in Indian securities anonymously use PN route. Any entity investing in participatory notes is not required to register SEBIeas all FIIs have to compulsorily get registered.
Indian-based brokerages buy India-based securities and then issue participatory notes to foreign investors. Any dividends or capital gains collected from the underlying securities go back to the investors.

However, a large number of Foreign Investors prefer P-Notes which protect their identity and give them easy and quick entry-exit opportunity. This money is used for huge market manipulations}
 

This entry was posted on Wednesday, October 17th, 2007 at 3:30 pm and is filed under Business, Economy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.