No stock market scam in offing, asserts Finance Minister

The Union Finance Minister, P. Chidambaram, on Saturday asserted that ``no scam is in the offing'' in the stock market as made out in certain sections with the Sensex surging towards the 8400 mark. "There is no cause for alarm. It is completely wrong to say a scam is in the offing and I deny such reports,'' Mr. Chidambaram told PTI, emphasising that his concern was not about the number the Sensex would hit but the price to earnings (P/E) ratio, which was in the comfort zone. "As long as P/E ratios are in the comfort zone and corporate performance is good, I don't think there is a cause to worry,'' he said. During the bull-run in the 1990's and early 2000 when the stock market crashed, Mr. Chidambaram said, the P/E ratio had crossed 30, 35 and even 40 and ``there is no such cause for worry now'' with the P/E ratio at about 16.5. At the same time, the Finance Minister said the government was keeping a close watch on the stock market to ensure that it functioned in an orderly manner. In this connection Mr. Chidambram had called a meeting of an internal committee of advisors on the capital market on Thursday. This was followed by a meeting with the Securities and Exchange Board of India (SEBI) Chairman, M. Damodaran, shortly before the Finance Minister left on a foreign tour to participate in the Commonwealth Finance Ministers meeting in Barbados and the World Bank-IMF meeting in Washington. The government had already looked into the exposure of public sector banks in equity and they appeared to be in order. They were well within the five% limit, the minister said. He said as a precautionary measure the Reserve Bank of India (RBI) had been asked to look into whether the non-deposit taking NBFC loans were within the prescribed limits, while the market regulator SEBI would look into the penny stocks. The fact that foreign investors had great confidence in the Indian market showed that the markets were well regulated, the Finance Minister said. There were no signs of a speculative bubble in the stock market even though it had risen substantially, he said. PTI