Stock market regulator Security and Exchange Board of India (Sebi) may introduce measures to restrict over-leveraged hedge funds in order to bring in more stability to the volatile market.
Speaking at a seminar in the Capital on Saturday, Sebi chairman C B Bhave said that "where the system is getting over-leveraged and the risk becomes too great, we must intervene and bring it down to ensure it does not lead to systemic risks." He said there is nothing to worry as the Indian stocks would be the first to bounce back in this global meltdown.
Bhave said the present turmoil in the financial markets has been mainly due to leveraged FIIs like hedge funds that are exiting the stock markets. He said, on the contrary, long-term investors like pension funds are buying equities at this moment. However, for the retail investors, the SEBI chief said they must not enter the market on borrowed money. He warned that people should avoid using their emergency funds to buy stocks, hinting that the present uncertain situation in the market may continue for some time.
"We have not found anything in the market that would give us suspicion that something had seriously gone wrong with the market itself," the SEBI chairman said while asserting that the stocks were actually wrongly priced in the bull run. "Pension fund investors stayed away from the market throughout 2007 because they felt it was wrongly priced, but they are investing now," he said.
Affirming his faith in the bounce back, Bhave said minimal selling has taken place since September 1. He said in comparison to FIIs stocks sales of Rs 22,000 crore and brokers Rs 700 crore in the last two-and-half months, mutual funds bought stocks worth Rs 1,000 crore, domestic institutional investors Rs 16,000 crore and other investors including retail Rs 5,600 crore.
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