Bull run makes Govt see red; Sebi, RBI go on alert

ALARM BELLS: Union Finance Minister says he is both surprised and worried over the surge in markets.

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New Delhi: The surging Sensex has rung the alarm bells at the corridors of power. As the Sensex hit the 19000-mark on Monday, the Centre sounded a note of caution.

Sources say the government has asked market regulator SEBI and the RBI to keep a check on the volatility in the markets.

Network 18 has learnt that the government has asked the two apex bodies to meet twice a month to keep an eye on the 'perceived' increase in volatility across financial markets. The government has also asked the regulators to take a view on the matters and implement necessary measures urgently.

On Monday, the BSE Sensex hit 19000-mark the fastest 1000 points rally, jumping from 18000 to 19000 in just four days. The Nifty too went the above 5,600 level. It is this sudden surge in the markets that has swung the government into action.

Only last week, Union Finance Minister P Chidambaram had expressed surprise over the steep rise of the stock markets.

Chidambaram attributed the rise of the Sensex to dizzy heights to strong foreign inflows of funds from a number of sources and added that speculators were taking advantage of the situation.

“Our assessment is the Sensex is driven by the copious flow of funds from a number of sources abroad. To some extent, speculators are taking advantage of the Sensex, but I think things will cool down after some time,” he said at the HT summit.

''The rather steep rise in the Sensex sometimes surprises me, sometimes worries me,'' he said. He added that the fundamentals do not change so rapidly from day to day.

Chidambaram also discounted fears that FII money would flow out of the country, saying that this has not happened ever since the reform process was launched 16 years ago.

The question in this regard related to fears that hot money could move out of the country just as quickly as it came in. He, however, said the inflows had contributed to a hefty appreciation of the rupee. The rupee has risen more than 12.5 per cent this year.

"The rupee rise is not in our comfort zone,'' he said. “There is nothing to suggest that inflows would move out as steeply as they had come into the country", he said.