The government said on Wednesday record investments in the equities market by foreign investors was not a matter of concern, but it would act if it finds any distortions.
Foreign Institutional Investors have put in a record over Rs 71,900 crore (over $15 billion) in the equities market so far this year and have driven up valuation of the rupee against the dollar, hurting exporters already hit by slowdown in the West.
"It (FII inflows) is not a matter of concern. We have a system of monitoring. Whenever we find that there are some distortions, we have the arrangement to counter them. Therefore, it is not disturbing," finance minister Pranab Mukherjee told reporters in New Delhi.
After turning negative following the collapse of US financial services icon Lehman Brothers since the middle of September last year, FIIs inflow into the Indian stock markets have begun to rise sharply.
The FII inflow is the highest ever investment made in rupee terms in a single year. FIIs have also net purchased debt worth Rs 11,890 crore (Rs 118.9 billion) during the period.
This has led to appreciation of the Rupee by over five per cent during the last six months, hitting exporters suffering from poor demand in traditional markets.
Exports have dipped for 13 straight months and fell 11.4 per cent to $12.5 billion in October this year.
While it is mostly attributed to slackening demand overseas, appreciating rupee is worsening the situation further.
