The stock markets have been going down and down in the last one month. What went wrong?

Several factors contributed to the fall of the stock markets in the last one month. The Asian markets were doing badly... Thailand, Indonesia, Korea and Hong Kong markets had fallen steeply in the last one month. Besides, Japanese yen had fallen against the dollar. Here, the Indian rupeehas been falling against the dollar. These factors affected the Indian markets also. Now FIIs are selling even to meet their payment obligations in South-east Asia where they had suffered heavy losses.

After the nuclear explosions, sanctions were imposed against the country. Investors are worried about the sanctions and how it will affect the economy. On Friday, Sensex fell by nearly 149 points as the US spelt out sanctions in some areas. The downgrading of India by global rating agencies has also affected the market sentiment.

FII selling pressure seems to have generally added fuel to fire. What has been the damage so far? Will it continue?

They were major sellers in the market in the last two months. Look at these figures. FIIs had sold shares worth $ 400 million (around Rs 1,700 crore) $ 396 million to be precise -- on the Indian stock markets in May and June. While FIIs sold shares worth $ 218 million in May, the sales amounted to $ 178 million till in June (1-17).

Now a new trend hasemerged. Indian brokers look at the movement of other world markets every day before making any commitments. They are also tracking the actions of FIIs who are major players in all the emerging markets of the world.

Is the Indian market safe for investors? There seemed to be excessive speculation in several scrips which led to payment problems last week?

The safety of the market has not been affected at all. Only certain individual brokers who failed to meet the payment commitments have got into the problem. The trade guarantee fund will take care of such payment problems. The fund is for this purpose only. Such problems are common all over the world. In 1987 stock crash in the US, a special cell was set up in the President's office to tackle the problem.

SEBI has launched an investigation into the price manipulation in several scrips in the last three months. The probe will basically focus on scrips like BPL, Videocon International and Sterlite. We started the investigations even before thepayment crisis broke out. We have laid out several rules and regulations for the market intermediaries.

Is Harshad Mehta behind the spurt in shares like Sterlite, Videocon and BPL?

I don't know. I cannot name any individual at this stage. Let the SEBI investigate the matter.

Won't payment crisis -- like the one we witnessed last week -- turn away investors from the capital market. What are the precautions you've taken?

Well, such happenings may turn away small investors from the market. We want a healthy and growing market and small investors should be part of that. In order to maintain the safety of the market, we've introduced the system of margins, concentration system, daily and weekly transaction limit, circuit breaker system (where only 10 per cent fluctuation is allowed in a scrip a day) and computerised online trading. We introduced several restrictions on short sales.

The weekly settlement has been carried out last week. The exchanges (BSE and NSE) have been able to sort outthe problems. Even if any broker fails to meet commitments, the Trade Guarantee Fund of the exchanges will tackle the problem.

Against this background, do you think the Indian market is ready for derivatives trading?

For derivative trading, there are separate rules and regulations which are very stringent. There won't be any problem in derivatives trading.

What is your view on buy-back of shares?

We've been supporting the introduction of buy-back of shares.

There were several reports about the grey areas in the takeover code. Are you reworking the code?

The Bhagwati committee on takeovers had met last week to discuss the takeover code. The issues will now be circulated among various members of the committee, various chambers, investor associations, related intermediaries and others, for a review of the issues and any other issues which might be recommended by these members will be discussed in the August meeting.