The Hindu : Business : ‘Concrete evidence can lead to market crash probe’

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Tuesday, Feb 19, 2008
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‘Concrete evidence can lead to market crash probe’

Special Correspondent

Parliamentary panel to meet again before submitting its report

No evidence of market failure on Jan. 22
U.S. sub-prime largely affected sentiment

NEW DELHI: The Finance Ministry is understood to have conveyed to the Parliamentary Standing Committee on Finance on Monday that the stock market crash on January 22 this year can be taken up for investigation only if “concrete” evidences pertaining to lack of transparency and wrongdoings are found.

At its second meeting here on the extreme volatility in markets, Finance Secretary, D. Subba Rao, is believed to have told the Committee that volatility in share prices was an integral and inherent feature of the bourses and there was no evident market failure on January 22 and during the trading sessions preceding it.

Mr. Rao, however, made it clear that if the Committee felt that there were concrete evidences of market failure and lack of transparency on those trading sessions, the concerned authorities might look into them.

On January 22, the domestic stock markets, namely, the Bombay and the National stock exchanges both suffered their biggest single-day slump owing to panic selling in the wake of very weak global cues. During the discussions, the Finance Ministry, at the outset, is understood to have told the Committee that the sharp fall in share prices on that day could not be attributed to any single reason even though the primary cause was the sub-prime mortgage crisis in the U.S. which led to net selling by foreign institutional investors (FIIs).

The standing committee, chaired by BJP member, Ananth Kumar, is slated to hold another meeting before submitting its report to Parliament during the Budget session starting February 25. During that meeting, for which the date is yet to be fixed, the Finance Ministry is to present its submissions in writing.

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