"Isolated instances of terrorist outfits manipulating the stock market to raise funds for their operations have been reported," Narayanan said at a security policy conference in Munich on Sunday.

His speech was only made available in India on Wednesday.

"Stock exchanges in Mumbai and Chennai have, on occasions, reported that fictitious or notional companies were engaging in stock market operations.

"Some of these companies were later traced to terrorist outfits," Narayanan added, without naming groups involved.

Narayanan said Islamist militants, who have launched attacks in India killing hundreds of people, as well as Sri Lanka's Tamil Tigers had in part funded activities through legitimate businesses, including restaurants, real estate and shipping.

He also said militants' money transfers had been noticed.

"Many instances of funds received via banking channels from so-called safe locations such as Dubai and UAE (United Arab Emirates) intended for terrorist organisations have been detected by Indian counter-terrorist agencies."

The last major attack in India was in July last year when bombs planted on local trains and at rail stations in Mumbai exploded, killing 186 people.

Police blamed the blasts on Islamist militants and Pakistan's spy agency.