Sensex sometimes surprises me, sometimes worries me
October, 13th 2007
Copious capital inflows reason behind the sharp increase: Chidambaram
Mr P. Chidambaram
The Finance Minister, Mr P. Chidambaram, on Friday said that the recent steep rise in stock market indices to record highs worried him sometimes, even as he asserted that the more than anticipated capital inflows were an important reason behind the sharp rise in share prices.
The rather steep rise in Sensex sometimes surprises me, sometimes worries me. Our assessment is that Sensex is driven by copious inflow of funds from number of sources. I dont think fundamentals have changed so rapidly from day to day to warrant such a steep rise, Mr Chidambaram said at Hindustan Times Leadership Summit here today.
The Finance Minister also said that speculators are to some extent taking advantage of the rise in Sensex. The benchmark Sensex extended its decline, after the Finance Ministers observations, to close at 18,419.04, down by 395.03 points from the previous days close.
Outside comfort zone
On the rupees rise to nine-year highs against the US dollar, the Finance Minister said the current level was outside the Governments comfort zone and that exchange rates have to be managed without hurting investments.
We have to maintain competitive exchange rate. I agree that these capital inflows are more copious than we would like them to be. Its a new situation. I think we will gain mastery over the new situation.
Meanwhile, he told the gathering that he expects to present the Union Budget (in February) and that he would stick to the reformist course.
It will be a Budget which will continue the effort we made in the four budgets. There is no reason to change the course. On the contrary, we must remain on the course and I will remain on the course, he said, when asked whether the Budget would be a populist or a reform-oriented one.
Stating that the UPA Government has delivered 8.6 per cent growth rate on an average, he said the most pessimistic projection for this fiscal was 8.5 per cent and that he did not see any reason for changing the course.