Sensex zooms 119 pts, FM advises caution

Unnecessary exuberance can lead to irrational despondency, says Chidambaram.

The Bombay Stock Exchange sensitive index gave a rousing welcome to Finance Minister P Chidambaram, who arrived in the city today, by touching a new peak of 7423 points "" a 119-point rise from its previous close. It was also the largest single-day gain since February this year.

Chidambaram, however, warned investors not to get over-excited about the booming stock market.

Pointing out that the stock market indices were reflecting "the true value of the economy", he urged all stakeholders to respond in a measured way. Inaugurating the tax information network (TIN) set by the National Securities Depository Ltd (NSDL), he said "The economy can do better and will do better this year going by the corporate results of the first quarter. But the market players should not show unneccessary exuberance. This is one of the fundamental reasons for the irrational despondency that usually follows."

Stock prices, however, rose sharply on sustained FII inflows, falling global oil prices and a near-normal monsoon.

NSDL had set up TIN in association with the income tax department and 33 banks under the supervision of the Reserve bank of India (RBI) to provide payment gateways to various companies and institutions involved in collection of TDS (tax deducted at source) here today.

Stating that there were about 36 crore workers in the country, Chidambaram said the electronic system of TIN would benefit over 4.3 crore employees and professionals, 10 per cent in the organised sector and two per cent in government employment.

Referring to the erstwhile Unit Trust of India (UTI) having over two crore accounts, the minister said there was a lot of scope for the depositories to enlist more investors in the years to come.

"The depositories should devise new schemes to attract more investors to open accounts with them," the minister added. Investors also said Indian exporters would see a competitive advantage from China's decision to allow its currency to appreciate 2.1 per cent.