He said FII investment in markets had dropped by $ 700 million in the last couple of months. Portfolio investments by FIIs stood at around $ 8.6 billion as opposed to $ 9.3 billion earlier, he said. "To have a GDP of 6 per cent in this kind of volatile environment is a tremendous achievement and FIIs are recognising this," he said. Despite all the volatility in this part of the world, India has been the least affected. Barring United States and Taiwan, all other markets have been far more volatile, Mehta added.

Referring to criticism that Sebi was killing the market with excessive regulation, he saidregulations were necessary to maintain investor confidence. "That's how the biggest markets grow." Primary market disclosure norms in India were comparable to the most advanced countries. In fact, tight disclosure norms was one reason (apart from recession) why the number of offer documents had come down from 150 to five a month. "Even in secondary markets our aim is to have the best international practices" he added.

The takeover code would be further refined by the end of the month, and regulations for buy-back would be announced by the end of the week, Mehta confirmed. Guidelines for credit rating agencies would be finalised at the next Sebi board meeting. The recommendations for collective investment schemes would be published by November 12, and based on this report, the Sebi would come out with regulations before the year-end.

Mehta advocated a "middle path" to introduce new, modern practices in the capital market. Going for a complete overhaul of the old system would lead to a crisis similar towhat Russia was facing. He warned that unless change was managed properly there could be serious problems.

"This method is going to work much faster and going to be effective," he added, referring to criticism that progress of reforms was slow.

"Partly the problem is law," he said about dematerialisation and the option to keep securities in physical form. The Sebi was introducing compulsion in small bits and by the end of the next year demat trading would be mandatory for all investors in 300 scrips. This would reduce complaints regarding delayed transfer of shares.