The Hindu Business Line : CPI MP seeks probe into stock market rally

THE Communist Party of India (CPI) MP and General Secretary of the All India Trade Union Congress (AITUC), Mr Gurudas Das Gupta, on Saturday demanded an immediate enquiry into the source of funds that is pushing the stock market indices to unprecedented heights.

In a letter to the Prime Minister, Dr Manmohan Singh, the CPI MP has demanded that an immediate enquiry is needed to "find out the source of funds and the role of the delinquent speculators, involvement of public sector financial institutions, growing investment of bank funds and illegitimate fund trafficking by mutual funds." Citing a specific example, Mr Das Gupta said in his letter, "The diamond branch of State Bank of India in Mumbai had advanced Rs 435 crore, which ultimately has found its way in the stock market."

Briefing newspersons, he said, "This diamond branch gives advances to the diamond industry, which has been diverted to the stock market."

In his letter, the CPI MP added, "The Finance Minister has said that he was satisfied because the price-earning ratio was moderate. What he was calculated was the average."

"What gives a rise to serious suspicion is that while the price earning ratio for a firm like ONGC is 9 to 10, SAIL 3.6 to 4, the price earning ratio for Dr Reddy's laboratory is 67 and for Bharti Televentures, it is above 122. The price of shares of Himachal Futuristic, which was less than Rs 5 a few months back, is today Rs 23," he said.

The industry, however, is optimistic about the market sentiment. A spokesman for the Federation of Indian Chambers of Commerce and Industry (FICCI) said, "The state of economy is in fine shape and the manufacturing sector is doing well. The monsoon had been normal and agricultural demand is on course. Exports are also on course. So stock markets are reflecting the sentiment."

Mr Rajiv Kumar, Chief Economist of the Confederation of Indian Industry, said, "The current rise in Sensex reflects the continued investor confidence based on the good economic performance."

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