Mumbai, October 26:

Indian shares rose over two per cent to a new intra-day high today, as investors shrugged off new rules to limit the anonymous buying of shares by foreign investors, dealers said.

They said capital goods, metal and property stocks rose on hopes of strong earnings reports by Indian companies. At 0700 GMT, the Mumbai stock exchange’s 30-share Sensex index was up by 450.88 points or 2.4 per cent at 19,221.77, after hitting a new intra-day high of 19,249.26 by noon.

The previous intra-day high was 19,198.66 on October 18. India’s stock market regulator, the Securities and Exchange Board of India (SEBI), yesterday announced new rules to phase out the anonymous buying of shares by foreign investors.

“The SEBI regulatory norms were not too restrictive and gave some clarity on foreign investor regulation,” said a dealer with ULJK Securities.

The new regulations primarily concerned participatory notes, which had allowed foreign investors like hedge funds to buy Indian shares without revealing their identity.

The notes are to be phased out within 18 months in the regulator’s bid to boost transparency. But some analysts have said the move was unlikely to deliver a major long term blow to foreign money flows into the Indian stock market.

Overseas investors have helped drive a stock market boom in India, pumping in a record $17 billion this year alone and helping the Sensex to surge more than 36 per cent. Global bank Lehman Brothers has said participatory notes account for about 51 per cent of foreign inflows. The flood of cash, attracted by India’s rapidly growing economy, has raised fears of a stock market bubble.

It has also helped to push the rupee up some 11 per cent against the dollar this year, making it more difficult for Indian exporters to stay competitive.

Call not to restrict capital flows

Washington: US treasury secretary Henry Paulson will press India in a visit there next week not to restrict its capital flows, his top deputy for international affairs said.

“We will encourage the Indian government to work closely with the private sector to ensure that any regulations they put in place are streamlined and really don’t inhibit the flow of capital,” said David McCormick, treasury undersecretary for international affairs.

His comments came as India’s stock market regulator said that new rules to limit the anonymous buying of shares by foreign investors had become effective.

The limits, first proposed last week, applied from the close of trading yesterday, said M Damodaran, the chairman of the Securities and Exchange Board of India.

Under the new rules participatory notes, or P-notes, which allow foreign investors like hedge funds to buy Indian shares without revealing their identity, will be phased out within 18 months.

The Indian regulators are afraid foreign hedge funds will cause greater volatility in the Indian markets.— AFP