The Left parties on Monday expressed serious concern at the government's decision to allow Qualified Foreign Investors to take part in domestic equity market, stating it would undermine the integrity of the financial system. “The decision will open the floodgates for greater capital flow into India and undermine the stability and integrity of our financial system,” Communist Party of India (Marxist) general secretary Prakash Karat told The Hindu.
Demanding a special session to discuss the economic crisis amid stagnation in growth and inflation in the backdrop of gloomy international financial situation, CPI Parliamentary Party leader Gurudas Dasgupta termed the latest decision “dangerous.”
The CPI leader said he had written to Prime Minister Manmohan Singh, objecting to the move. “The stock markets are on the decline and the situation is critical” and the decision to allow individual foreign investors will not help,” he said. Unlike the Foreign Institutional Investors who retain investments for a longer period, individual investors may indulge in short-term and even intra-day trade and exit after booking profits.
Besides encouraging ‘fly-by-night operators' to take part in the markets, Mr. Dasgupta said, the decision would cause frequent convulsions in the stock markets because of inflow and outflow of overseas funds. To improve market sentiments and infuse confidence in investors, the government should boost investment and production. “If there is improvement in market, it will also benefit domestic investors, halt the slowdown and reverse the trend,” he said.