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Sensex hits biggest single day gain
Last Wednesday after discussions with the Reserve ministry and market regulator Sebi announced their intentions to tighten the lid on foreign investments in the stock markets. The markets went into a tizzy and the sensex recorded its biggest ever loss in a single day -717 points.
On monday, sebi clarified that in principle, it isn’t a gainst foreign funds in the stock markets. It also framed new rules that made things simpler for these investors. Not surprisingly then, on Tuesday, stocks posted large gains and the sensex shot up 879 points its biggest single day gain ever. Think of it as bungee jumping. Through the rise in percentage terms was smaller than what the sensex has seen in the past, pivotals recorded big gains to bring back buyers. Stock like Reliance Industraies and Bharat Heavy Electricals, big losers in the fall last week shot up and pulled the index up 5%. Investors wealth rose Rs 1.25 lakh crore.
The drama started last week when Sebi said it intended to ban P-notes, an instrument used by foreign investors not regestered with Sebi, to invest in India stocks. Analysts believe this was prompted by the RBI, which wanted to do away with the instrument.
RBI argument being that the country did not need money from unregistred firms. This the RBI believed would erode India capital markets in the long run.
To get around the problem Sebi initiated a fast track process that allows foreign investors who were using the P-note route to register and continue investmenting in the markets. As opposed to a few months, the process, Sebi said, will now take only a week.
All of this means it is back to business as usual on the stock markets but with a bit of added safety. The registration process will also satisfy RBI demands for doing away with anonymous investors.