The Hindu : Business : FM’s assurance halts free fall in stocks

Online edition of India's National Newspaper
Wednesday, Jan 23, 2008
ePaper | Mobile/PDA Version

Business

Business

FM’s assurance halts free fall in stocks

Special Correspondent

Benchmark Sensex loses 875 points (net)

Indian economy on a strong footing
Offloading is a result of margin pressure

NEW DELHI: A word of reassurance by Finance Minister P. Chidambaram to panic-stricken investors on Tuesday partially halted the free fall on the bourses on the second consecutive day of mayhem following the global meltdown triggered by the fears of recession in the U.S.

Mr. Chidambaram’s statement virtually talked up the market as the 30-share Sensex, which had nosedived by 2272.93 points to 15332.42 during intra-day trade, recovered partially to end the day at 16729.94 with a net fall of 875.41 points, down 4.97 per cent from Monday’s close.

Such was the panic selling in the market within minutes of its opening that trading had to be suspended for one hour following a slump of over 10 per cent which triggered the circuit breaker. Commenting on the development, Mr. Chidambaram said: “We had anticipated that markets will open on Tuesday on a downward note and may hit the circuit breaker.” Stocks, however, plunged further on resumption of trading at 1055 hrs.

What seemed to reverse the investor sentiment marginally was the Finance Minister’s assurance that the country was strong and, therefore, the market should not allow worries of the Western world to overwhelm it. “Worries of [the] Western world should not be allowed to overwhelm us...our economy is very different from some economies of developed countries. Our economy is a strong economy and corporate sector is very strong,” Mr. Chidambaram said.

When pointed out that the panic offloading was possibly on account of margin pressures, he said: “I am assured by the Reserve Bank of India and all the banks that enough liquidity will be provided to brokers and market players. Liquidity will not be an issue.”

Economic growth

He was confident that would return to the market as the economic fundamentals were strong and there was no ground for negative sentiments in the long run.

“We will grow at nine per cent this year. Even the Rangarajan Committee [Prime Minister’s Economic Advisory Council] has said we will grow at 8.5 per cent next year,” Mr. Chidambaram said, while pointing out that banks had also reported that investments were running high as the demand for credit was strong.

“The RBI has stated that investment in pipeline is also strong. Fundamentals [of the economy] are very sound. Corporate profits are high and corporate income tax is at an all-time high,” he said.

Asked if financial institutions would be advised to buy stocks to shore up the market, Mr Chidambaram said: “We are not advising institutions to do this or that. Institutions are good judges of what are valuations today.” Advising investors to remain calm, he said: “I am sure investors will take informed and mature decisions and not give any room to unwarranted apprehensions and market rumours.”

Printer friendly page
Send this article to Friends by E-Mail

Business