The new margin system, intended to reduce volatility in stocks, would define `volatile' scrips and prescribe margin rates based on the extent of volatility. He clarified that Sebi had not banned short sales but only restricted short sales to a day as would happen in a rolling settlement scenario.

He admitted that damage containment measures taken by Sebi in the aftermath of the Pokhran blast was to curb excessive speculation which was bad for the health of the markets and the confidence of investors. The Sebi chief pointed out that the net outflow of FII funds for June was $212 million up to Thursday.

On secondary market reforms, Mehta said several steps had been taken to improve transparency and disclosures including thelatest one requiring corporates to publish quarterly results.

Mehta felt that the issue of broker defaults on major bourses had been overplayed because the payments for the settlement had been duly made out of the guarantee funds of NSE and BSE. He admitted, however, that the total dues from defaulting brokers was around Rs 30 crore from 15-odd brokers out of which about Rs 12 crore was outstanding on account of NSE members.

Later R H Patil, managing director of the NSE, told The Financial Express that there was no crisis as the defaulting members had been basically financed by the exchange and there was adequate cover with the exchange in the form of impounded securities which were deliverable to the concerned members.

The primary market, Mehta said, had seen a qualitative improvement although the number of initial public offers had dropped to 10 per month against 150 three years back. In fact, the amount raised by mutual funds in 1997 was more than new issues.

He hoped that the sharp fall inmobilisation from capital issues would pick up again once the overall sentiment improved. Mehta conceded that the absence of small investors was disconcerting and Sebi was constantly engaged in removing market distortions.

He brushed aside charges that Sebi was not consulting market intermediaries before taking major decisions. He said: "I am often criticised for giving brokers too much importance. The problem lies elsewhere; brokers complain when certain decisions do not suit them."