Indian Stock Market - Is there a problem with it?

Yesterday's sudden crash leading to closure of market questions the stability of the Indian market. Many small time investors have incurred heavy losses. All this drama in spite of the companies in market coming out with very good quarter results and robustness of the Indian economy. The market after this crash seems to clearly indicate that it is totally controlled by the foriegn institutional investors. We are being controlled economically by foriegn powers. Our economic sovereignty seems to have been compromised. Our own investors are at the mercy of these FIIs.
Also there seems to be a centralisation of control in the performance of the market with FIIs dictating market. So how should the market be controlled? The market should never be at the mercy of a certain group like the way it is now. The market needs to be owned by more retail investors and it should not be dictated by whims of the FIIs and rather by performance of the companies that inhabit it. The predictability of the market seems to have been lost and even knowledgeable investors look insensible in such a market.
The solutions to reform our market seems to be the following
1) Encourage local investors to participate in the market. Decentralisation in control over market should be established.
2) Exercising control over foriegn investors and also encouraging them to invest. A balance should be sought.
3) Performance and capability of companies should act as the criteria for setting the price of the stocks.
4) Government's ability to maintain stable and strong economy should be a guideline to gauge the markets.
5) Rumours do have an effect on the market but they shouldnt lead to a crash. The policy makers have a responsibilty to dispel unreasonable fears in investors.

As far as the current crash is concerned, the people responsible have handled it well but it is important they learn their lessons to moderate the market. SEBI should undertake a detailed study on the market condition and should start regulating it. SEBI should realise that it should work towards creating wealth for its own people and also protect them.