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Journalism of Courage
FINANCIAL sector regulators are planning to put in place a stiff set of measures to prevent excessive volatility in the stock and currency markets on May 16 — the day of the Lok Sabha election results — that could create a headache for the new government on assuming office.
The finance ministry has called a meeting of the Financial Stability and Development Council on May 13 as reports are coming in of a build-up in positions in the stock, currency and commodity markets. The meeting will be chaired by finance minister P Chidambaram.
Insurance, commodity and pension regulators will also attend the meeting, an official said.
“Financial markets are keeping a close watch on election results. In case the results are unpredictable, it can lead to a crisis like situation akin to that in 2004,” the official said.
Meanwhile, the stock market regulator is understood to have decided not to allow a special trading session on May 17 despite requests from several brokerages.
“There has already been a currency crisis last year and the current account deficit is just under control. We want to be ready for all eventualities,” said another official.
Among the measures being planned are lower triggers for circuit filters in the stock markets and ensuring the stock and commodity exchanges insist on adequate margins from brokers so that there is no run on liquidity.
Banks are also expected to ask their trading departments not to take very long positions as a precautionary measure.
