Saturday, September 17 2005 15:26 Hrs (IST) - World Time -

New Delhi: Finance Minister P Chidambaram today (Sept 17, 2005) asserted that 'no scam was in the offing' as made out in certain sections with the Sensex surging towards the 8,400mark.

"There is no cause for alarm. It is completely wrong to say a scam is in the offing and I deny such reports," Chidambaram told sources emphasizing that his concern is not about the number the Sensex will hit but the Price to earnings (P/E) ratio, which is in the comfort zone.

"As long as P/E ratios are in the comfort zone and corporate performance is good, I don't think there is a cause to worry," he said.

During the bull-run in 90s and early 2000 when the stock market crashed, Chidambaram said the P/E ratio had crossed 30, 35 and even 40 and "there is no such cause for worry now" with the P/E ratio at about 16.5.

At the same time, the Finance Minister said the Government was keeping a close watch on the stock market to ensure it functioned in an orderly manner.

In this connection Chidambram had called a meeting of an internal committee of advisors on the capital market on Thursday. This was followed by a meeting with Security and Exchange Board of India (SEBI) Chairman M Damodaran today, shortly before the Finance Minister left on a foreign tour to participate in Commonwealth Finance Ministers Meeting in Barbados and the World Bank-IMF meeting in Washington.

The Government has already looked into the exposure of Public Sector banks in equity and they appeared to be in Border. They are well within the five per cent limit,Chidambaram said.

He said as a precautionary measure RBI has been asked to look into whether the non-deposit taking NBFC loans were within prescribed limits, while market regulator SEBI would look into the penny stocks.

The fact that foreign investors have great confidence in the Indian market went to show the markets are well regulated, the finance minister said.

He said there were no signs of speculative bubble in the stock market even though it has risen substantially.