The Hindu : Front Page : Stock market recovers a little after record crash

Online edition of India's National Newspaper
Tuesday, May 18, 2004

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Stock market recovers a little after record crash

By Our Special Correspondent

NEW DELHI, MAY 17. The lack of clarity on the economic policy and the delay in the finalisation of a common minimum programme (CMP) of the Congress and its allies led to a historic fall of the Bombay Stock Exchange Sensitive Index (Sensex) by over 842 points in the early hours of trading today.

The market recovered somewhat later in the day after the Congress leader, Manmohan Singh, came out with a categorical statement on the general outline of the economic policies to be followed by the new government. The outgoing Finance Minister, Jaswant Singh, also intervened to check the free fall of the Sensex.

Trading on the Bombay Stock Exchange and the National Stock Exchange was halted twice after the Sensex dipped by as much as 842.37 points. After a call from Dr. Singh to Mr. Jaswant Singh, the financial institutions reportedly entered the market as buyers. The Sensex subsequently closed at 564.71 points, lower than the last trading session. About Rs. 1,24,000 crores of market capitalisation was wiped out at this level of the Sensex.

Dr. Singh's statement said that "the Congress is committed to the orderly and healthy development of the financial markets that reflects the fundamentals of the economy. Its policies will be pro-growth, pro-investment, pro-savings, pro-employment. There is absolutely no need for panic in the market."

He also announced that the United Progressive Alliance led by the Congress would unveil its CMP soon demonstrating its commitment to fiscal discipline, realistic growth-oriented tax policies, control of unproductive and wasteful expenditure and increased emphasis on agricultural growth, education, health, food security and social security in the context of a fast growing economy that was integrating with the world as well. "Fiscal and other policies will seek to create a favourable climate for enterprise, both Indian and foreign. There will be stability and transparency in all policies." Dr. Singh said he had spoken to Mr. Jaswant Singh and shared with him the concerns over the developments. "The new government will not hesitate to take action against those who seek to manipulate markets and create unnecessary panic."

Referring to the apparent contradictions in the policies of the Congress and its allies, Dr. Singh said: "I believe whatever contradictions that seem to exist in the stance of our allies will be resolved satisfactorily in a manner which will see an orderly progress on all fronts in years to come.''

Mr. Jaswant Singh said he had discussed the market crash with the Securities and Exchange Board and the Reserve Bank. "Although I do not have any authority, my advice is to be cautious," he said. Asked whether the markets were being manipulated, he said, "I would be extremely cautious in commenting on this issue. We have a healthy market and our economic fundamentals continue to remain strong."

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