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Markets watchdog to probe Tuesday's crash

The Securities and Exchange Board of India, or SEBI, will look into all aspects of the crash triggered by foreign institutional investors on Tuesday.

SEBI chairman D R Mehta revealed that out of $ 11.4 billion net portfolio investment by the FIIs, an overwhelming $ 7 billion had come through the controversial Mauritius route.

"We are duty bound to look into all the aspects of any undue volatility in the market place," Mehta replied to a question whether SEBI would probe into Tuesday's crash, which was partly set off by Income Tax notices on Mauritius registered FIIs taking advantage of double taxation avoidance treaty.

The SEBI chief asserted that there was absolutely no risk of payment crisis because of the volatility since the margin system is quite tough and safe.

"The market has been saved because of our tough standards."

The Indian market has seen one of the wildest volatility this week with the Sensex falling and gaining by over 7 per cent in two separate sessions.

At the intervention of the Finance Ministry, the Central Board of Direct Taxes has since suspended the Income Tax notices issued to FIIs, which claimed capital gains tax. The CBDT move followed strong criticism and reaction by these funds in the market.

Mehta said both BSE and NSE had assured him after the Tuesday crash that there was no payment crisis at the bourses.

"I personally checked with both the exchanges to find out whether there was any problem and I got proper assurances."

He said even if one or two brokers had failed to meet adequate margin money, the corpus in the Trade Guarantee Fund was enough to hedge the risks.

The SEBI chairman advised investors to be vigilant, especially in the case of high premium initial public offerings. "The investors are well advised to read carefully pertinent disclosures as given in the prospectus," he said.

UNI

Business