The Hindu Business Line : Global fund flows

In the context of the changes taking place in the global monetary scenario, there are bound to be changes in the Indian capital market because of the variations in the inflow of foreign institutional investments.

Such investments mostly reach the capital market because of the high reputation enjoyed by the corporates and the attractive returns.

While their entry into the stock market causes volatility due to their natural bullish and bearish character, entry into the equity structure of corporates as investments carries its own risks.

The stock market is the one route through which such entry into equity ownership could be achieved and, hence, a degree of vigilance is called for.

The stock market is highly sensitive to pronouncements by those in regulatory authority and a degree of caution on their part is necessary to avoid extreme instability.

While entry of anonymous players into trading is possible through ODI/PNs, it is necessary to arrest it by establishing transparency in the activities.

But it is best to take action in phases and in an unobtrusive manner to avoid adverse sentiment in the share market, causing further volatility.

One must, however, understand that a certain degree of volatility is here to stay due to global monetary changes, and to base market operations on this reality.

T. R. Anandan Coimbatore

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