No scam behind market meltdown: SEBI

Ruling out market manipulation or a scam behind the recent market meltdown, regulator SEBI today said only those FIIs who have borrowed huge amounts are leaving the markets, while long-term investors like pension funds and retail investors are picking up stocks.

“We have not found anything in the market that would give us suspicion that something had seriously gone wrong with the market itself,” SEBI chairman Mr. C.B. Bhave said here at the HT Leadership Summit.

When observed by the discussion moderator that the regulator is giving assurance that scams, which took place in bull runs in the past, are non-existent or negligible this time, Mr.Mr.Bhave said, “So far we have not seen anything.” Only leveraged FIIs like hedge funds are going out of the market, he said, adding that long-term investors like pension funds and university funds are buying stocks.

“Equity is going into the hands of people who have patience,” he said, pointing out that many people who stayed away from the market last year have now started buying stocks.

Mr.Bhave said if four FIIs sold stocks, three others bought them during the period from September 1 to November 14, 2008. He said FIIs net sold stocks worth Rs 22,000 crore, while brokers sold stocks worth Rs 700 crore on proprietary accounts in this period.

On the other hand, the net buying of stocks by mutual funds was worth Rs 1,000 crore, domestic institutional investors Rs 16,000 crore, and other investors, including retail Rs 5,600 crore.

The market watchdog’s analysis shows that there was minimal net-selling from September 1 to November 14.

Mr.Bhave said India would be among the first few countries to recover fastest from this crisis and in the meantime it should focus on institutional reforms required to handle bigger markets.

Mr.Bhave said India’s weight in the world would be greater after the crisis goes than what it had been before.

Pointing out that smart investors are in fact picking up stocks in the current scenario, he said, “If you think Indian investors don’t have money, if you think Indian investors are running away, think again. There are some smart guys sitting out there, who think that this market is giving valuations.” Mr.Bhave said even among FIIs, long-term investors are buying stocks at current valuations. “Pension fund investors stayed away from the market throughout 2007 because they felt it was wrongly priced, but they are investing now,” he said.

However, Mr.Bhave cautioned retail investors against borrowing to invest in equity markets. He also advised them against putting money, which is to be used in an emergency situation, in the stock markets. — PTI