October 17, 2007 The Financial Express
Minutes after the carnage at the bourses, government on Wednesday said it is not in favour of banning Participatory Notes and hoped that "the initial sense of alarm in stock markets" will quieten as the day progresses.
"We are not in favour of banning participatory notes. We have not banned PNs, we have simply placed a cap on the proportion of money coming through PNs vis-a-vis overall assets under management or overall derivative position," Finance Minister P Chidambaram said on the morning crash, that forced authorities to close the market for an hour.
Within minutes of opening, the markets crashed and BSE plummeted by over 1700 points forcing the Exchange authority to take an unusual step of stopping trading till 1100 hrs.
Markets staged a remarkable recovery after recommencing trading, cutting the losses by nearly half in less than half an hour following reassuring comments of Finance Minister.
"The fundamentals of Indian economy have not changed from yesterday to this morning, corporates are announcing results for the second quarter and profits are still very handsome," he added.
He described Sebi's proposals as a good step in the interest of investors and markets. Sebi's proposals are intended to moderate the inflows of capital.
The sharp fall in the market was induced by Sebi's proposals for curbing offshore derivative instruments (ODIs) like PNs that were placed in a discussion paper on Tuesday night with the stated objective of checking flow of anonymous funds to the bourses.
He said market sentiments are not a function of capital inflow or outflow alone.
http://www.financialexpress.com/news/Govt-not-against-PN-says-PC/229336/
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