ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Global Capital and the Stock Market Boom

Governments ignore at their peril the risk that certain kinds of private capital inflows pose.

The decision of the Securities and Exchange Board of India (SEBI) to curb the use of participatory notes (PNs) for investment in the Indian stock market appears to have had the effect of putting the brakes on the dizzying rise in the Sensex. PNs constitute nearly 52 per cent of total investment by foreign institutional investors (FIIs) in the Indian market; in incremental terms the proportion in recent years has been even higher. The SEBI decisions mark a welcome, if somewhat belated, acknowledgement on the part of the finance ministry of the need to address the PN issue squarely.

Consequent to the US Federal Reserve’s move to cut interest rates in September, India’s stock market has had the sort of bull run that investors only dream of. From 15,669 on September 18, the Sensex zoomed past the 19,000 mark in less than a month.

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