Don't blame any investor class for market volatility: ASIFMA

 Amid persisting volatility in the Indian markets, an influential grouping of global financial players has said there is "no point" in trying to blame a particular class of investors for the fluctuations while asserting that "knee jerk" reactions should be avoided.

The Asia Securities Industry & Financial Markets Association's (ASIFMA) views come against the backdrop of domestic currency and the stock markets witnessing significant volatility, amid concerns about the US Federal Reserve plans to taper its easy money regime.

"Markets always fluctuate and there is no point trying to point the finger of blame at any class of investors, local or foreign...," an ASIFMA spokesperson told PTI.

The key is to avoid "knee-jerk" reactions or introduce ill thought-out measures that may make the markets more, rather than less, volatile over the longer term, the spokesperson said.

Members of Hong Kong-based ASIFMA include global and regional banks, securities dealers, brokers, asset managers and credit rating agencies.

Foreign investors pulled out around Rs 3,000 crore from stock market last week. Since the start of this year, overseas investors have pulled out over Rs 25,000 crore from the country's debt market.

Striking an optimistic note, the grouping emphasised that periodic corrections, even sharp ones, tend to get reversed in the longer term.

Faced with plunging rupee, slumping stock markets and high levels of Current Account Deficit (CAD), the authorities have unveiled various measures.

Without mentioning specific steps, the grouping also said that some of the recent actions seem to have been hastily formulated with inadequate consideration for their impact.

"For example, recently announced policies aimed at supporting the Rupee had the unintended effect of raising fears among investors about long-term policy stability.

"If the rules of the game are changed after investors have made their capital commitments, risk is increased immediately, degrading the value of past investments and reducing willingness of existing and prospective investors to make further
commitments," the spokesperson said.

To curb the rupee volatility, the Reserve Bank of India (RBI) in recent weeks initiated many steps including caps on overseas investments by domestic entities.

The rupee, which has depreciated about 15% since April 30, touched an all-time low of 65.56 in intra-day trading against the US dollar on August 22.