The Hindu Business Line : Market havoc

A variety of factors is said to have caused the stock market crash of May 22: the unguarded observations of the Finance Minister, Mr P. Chidambaram; the ambiguity in the definition of trader and investor in a recent circular of the Central Board of Direct Taxes; the want of preemptive action by the SEBI; the cooling of the market itself after a period of overheating; and the manipulation by speculators who took the market to unsustainable heights and, after squeezing it dry, let it crash.

The clutch of theories is enough to keep analysts busy for weeks and months. The point behind it all is that India may be 15 years into liberalisation but the investors, the economic players and the people at large are not yet accustomed to the roller-coaster ride of free market economy.

It is also patent that habitués of Indian capital markets are yet to acquire the maturity and savvy needed to maintain a sense of proportion and balance, and continue to allow themselves to be buffeted by transient surges of irrational sentiment.

Taken together, these traits, inherent in an economy which is yet to be fully integrated within itself and with the developments in the global arena, cause convulsions to which everyone over-reacts.

The only persons trying to restore sense and sanity into the situation are Mr Chidambaram and the Chairman of SEBI, Mr M. Damodaran.

The former's advice to investors not to panic but to stay investing, and the latter's assurance that all the necessary safeguards and systems are securely in place and correctives are being applied as required, are exactly the right notes to strike at this juncture.

Let us hope they will help the market get back to normality soon.

Both the print and electronic media must remember that too much of breast-beating and opinions from experts, many making off-the-cuff pronouncements, are apt to worsen the situation. Cool heads are the best asset at such times.

B.S.RAGHAVAN

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