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Fall halted?

THESE ARE EXTRAORDINARY times. If it was a Disaster Monday, it was Relief Tuesday. The lower-than-expected fall in Dow and Nasdaq obviously helped sentiment across Europe and Asia. If there was no ``patriotic rally'' on Wall Street, when it resumed tradi ng on Monday after a four-day shutdown, it was because investors were too unnerved.

Even the Fed rate-cut, by half a percentage point, and the promise of share buybacks by companies did little to cheer them up. Maybe they needed time to get over the fright and regain their balance. Reflecting the trend, the markets at home have steadied somewhat. The rupee is ranged with some solid administered support. There are strong indications of FIIs being active buyers again. This is a good sign considering that last week they turned net sellers after a long time.

For its part, the Government has initiated measures to lure back the FIIs, which are perceived as a lifeline for the market -- they indeed have proved so over time. Apart from proposing to raise the FII investment limit in Indian companies, SEBI is to pe rmit these funds to participate in all equity derivative products once it finalises guidelines. Other measures to shore up the capital market are easier share buyback norms and higher creeping acquisition limit from the present 5 per cent.

Also under consideration is giving SEBI more powers. But, then, these proposals, hanging fire for quite some time, should have been in place much earlier and not waited for the present crisis. Another facility being introduced is margin trading. Banks wi ll be allowed, within certain limits, to finance stock brokers for the purpose. This will be limited to actively traded shares in the benchmark indices and for two months. Whatever the impact of these measures on the market, the broad sentiment remains s haky in the prevailing atmosphere, and investors may not take large positions.

Can the markets thrive if the economy is going downhill? The Government is hardly seen putting in place any contingency plans in the event of escalation of tension in the region. It seems more concerned with the politics of the situation rather than the economic implications. The economy has weakened badly in the last couple of years. There have been warning bells on the fiscal front too. But the Government continues with its ambivalence -- one is not sure what it thinks of private investment as it harp ed on big public spending.

It has so far not come out with any concrete plan to give shape to intentions. Now there are reports that the people of this country may be in for a Kargil-type surcharge. In total contrast, the near recession-hit US bets on reducing taxes on its people so that they have more purchasing power and can stimulate demand. The NDA Government's intentions seem exactly the opposite. Its move, if it comes about, may accentuate the problem and pull down the economy further. In the current political setting, remo val of non-merit subsidies is a hard option. And surcharges will be easy money to make, and spend too. If the Government believes its health is more important than the economy's, the country will be the poorer for it.