An effective settlements system has helped Indian stock markets face the challenges posed by the global financial meltdown, the SEBI Chairman said today.
"We have had a challenge when the index came down heavily. Our stock exchanges have proved equal to the challenge and settlements were on schedule," Securities and Exchange Board of India (SEBI) Chairman C B Bhave said at the Simergence 2009 seminar here today.
"There have been instances around the world where countries have had to close down their stock markets (due to problems in their financial system) or suspend trading for a week or more. In India, we did not have to do any of those things," Bhave said.
Indian stock markets crumbled and mutual funds faced redemption pressures with the onset of the crisis in global markets, which originated in the US due to the sub-prime turmoil, and later the collapse of Lehman Brothers.
"With the collapse of Lehman Brothers, trust failed between corporates (and) that has had an adverse impact (on) the world markets," Bhave said.
Noting that the domestic economy is now more integrated with the global markets, Bhave said the regulators will have to act in concert internationally to face the challenges in financial markets.
Joint actions by the government and the Reserve Bank coupled with the efforts of the market regulator have helped overcome the challenges faced by mutual funds companies in the the recent past, Bhave said.
"With the credit crunch, corporates started withdrawing their money from mutual funds, resulting in redemption pressure on mutual funds. With the help of the Government and the RBI, we were able to keep the confidence in the system," Bhave said.