No payment or liquidity problem, says finance ministry
New Delhi: The Finance ministry has indicated that margin call pressures on brokers trading through proprietary accounts might have accentuated the stock market slide on Monday morning. They also asserted that there was no payment or liquidity problems in the stock exchanges.

"The liquidity concerns have been addressed. The RBI has advised banks to provide ample liquidity to those who may require money to meet margin requirements. I don't see this as a concern anymore," Ashok Jha, secretary, department of economic affairs (DEA), told reporters at a hurriedly convened late afternoon briefing at North Block.

Earlier in the day, the finance minister, P. Chidambaram, told reporters outside Parliament that there is no problem of liquidity and there is no reason to panic. He said the RBI Governor, Dr Y.V. Reddy, had assured him that banks would provide enough liquidity to meet margin calls.
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LIC in bail out act
Mumbai: PSU insurer, the Life Insurance Corporation of India, may have performed a bail out act in the stock markets on Monday when it recorded its steepest fall ever.

According to LIC officials, the PSU insurer bought stocks in excess of Rs100 crore on Monday and around Rs180 crore on Friday. Last week, the corporation bought stocks worth Rs700 crore.

According to officials in the organization, the insurer has been buying oil, IT and banking stocks in the past week. The officials also denied reports that the insurer bought equities under pressure from the finance ministry. They clarified that as the market was overvalued, with a correction long overdue, it was very likely that post-correction the market would now base itself on strong fundamentals.

LIC's gross investment in the equity market, including ULIPs in the recently concluded fiscal was around Rs14,867 crore. The book value of LIC's equity investment is around Rs44,000 crore.
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Market meltdown: CBDT clarifies
New Delhi: The Central Board of Direct Taxes (CBDT) has refuted the opinion of a tax consultant carried in a newspaper report, which sought to give the impression that a market investor would "have to live at the mercy of the tax officials."

CBDT officials, through a statement, characterized the report as being totally incorrect and inappropriate.

"Whether a person buying and selling shares/securities is a trader or an investor is a question of fact. In 1989, guidelines were issued for the guidance of assessing officers. Since then, there have been a number of judgements of the courts.

"Culling out the principles from these judgements, the guidelines were updated and a draft circular was posted on the website a few days ago. Nevertheless, the question whether a person purchasing and selling shares/securities is a trader or an investor remains a question of fact. The Assessing Officer would have to take note of the totality of the facts and circumstances before reaching a conclusion.

"This position has been made clear in paragraph 10 of the 1989 circular and in the last paragraph of the present draft circular.

"The draft circular does not refer to FIIs at all. Nor does it purport to deal with any case or class of cases. The draft circular was put out to provide greater clarity for the guidance of assessing officers. CBDT rejects the opinion of tax consultants that the draft instructions are "ambiguous".
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