Press Trust of India
New Delhi, August 24: Terming Monday’s market crash as “transient and temporary”, Finance Minister Arun Jaitley said both the government and RBI are watching the situation and hoped it will stabilise as domestic macroeconomic indicators remain strong. Jaitley attributed the biggest ever drop in the benchmark Sensex to external factors and said that India is among the fastest growing economies of the world and the government is taking steps to further strengthen it.
“There has been for the last few days a great amount of turbulence in the global markets. Obviously, that turbulence has had impact on Indian market itself. The factors responsible for this are entirely external. “There is not a single domestic factor in India which has either contributed or added to it. These are external factors. I have not the least doubt that this turbulence is transient and temporary in nature. Markets will settle down”, he said. In the worst-ever crash in stock markets, Sensex Monday plunged by 1,624.51 points at 25,741.56 — its lowest level since August 2014 — and nearly Rs 7 lakh crore got wiped out from the investors’ wealth. Besides, the rupee fell most in 23 months to hit a two-year low at 66.64 against the US dollar.
Speaking earlier in the day, RBI Governor Raghuram Rajan said the central bank has resources to deal with the rupee volatility. The government and RBI are closely watching the situation, Jaitley said, adding that efforts would be made to further strengthen the economy to deal with the impact of global developments.”Our fiscal deficit figures are under control. Inflation is very much under control. We stand by the growth projections which we made at the beginning of the year and indirect taxation data actually supplements the idea of those projections,” he said.
Corrective steps must come soon: India Inc
As the BSE Sensex crashed 1,624.51 points, India Inc Monday said the policymakers in the country must ensure corrective measures at the earliest to rebuild investor confidence, both domestic and overseas, jolted by the biggest-ever plunge in the Indian markets. “The fall in Sensex affects confidence for investments. Anyway there have not been much investments in the last few months. You have to rebuild confidence of investors in the market,” CII President Sumit Mazumder told PTI. “It will have severe repercussions on the sentiments of investors, both domestic as well as overseas. Corrective measures will have to be taken at the earliest by the RBI and government,” Assocham Secretary General D S Rawat said. CII Past President Ajay Shriram termed the crash as a “reflection of global situation”. On the rupee fall, he added that “exports are impacted already due to downturn in the global market. The rupee falling will benefit Indian exports. However, the imports will be affected badly”.
7 of ten biggest crashes on Mondays
It was a ‘Black Monday’ again in markets Monday and history shows that seven out of the ten biggest carnages on Dalal Street has taken place on a Monday!
This strange coincidence holds true for biggest crashes in terms of intra-day movements as well as the closing levels of the market benchmark Sensex.
The Sensex Monday closed for the day at 25,741.56, down 1,624.51 points — marking the biggest ever mauling it has received historically. The second highest closing fall for the markets was also on a Monday, January 21, 2008, when it closed for the day down 1,408.35 points. Out of the ten biggest falls at closing levels, seven has been on Mondays, two on Thursdays and one on Tuesday.
Rajan hints at rate cut
Amid bloodbath in stock and currency markets, RBI head Raghuram Rajan tried to allay fears saying the country has strong macroeconomic fundamentals and sufficient forex reserves to contain volatility while he also hinted at a rate cut if inflation remains low. “I just want to indicate that we have plenty of reserves which was $355 billion (at the last count), plus $25 billion that exist because some of our forward sales. We have got $380 billion to play with,” Rajan told a banking summit on a day when the rupee plunged below 66.60 and the market tanked 4 per cent, its worst single-day fall in seven years. “I wish to reassure the markets that our macroeconomic factors are under control as the economy is in much better position relative to many other economies,” Rajan said. To a question on the bloodbath in the market and whether he expects the free fall in the US and the Chinese market to continue, Rajan said “I think few expected the Chinese move. Now, given that it has become a focal point for markets to adjust, there was a sense that markets have been going up for sometime without correction and when that happens it seems that people get nervous.”
Volatility part of capital markets: Sinha
Volatility is part and parcel of capital markets and the players will have to adjust themselves to the emerging situation, Minister of State for Finance Jayant Sinha said. “It is external factors which are causing volatility and turbulence which you have seen across these asset markets. This will take time to play out, volatility is part and parcel of operating in these capital markets,” Sinha said.
Great fall of China sinks world stocks
World stock markets plunged Monday, as a near 9 per cent dive in China shares and a sharp drop in the dollar and major commodities sent investors rushing for the exit. The Dow Jones Industrial Average dropped more than 1,000 points as Wall Street opened, and the benchmark Standard & Poor’s 500 index slid more than 2.5 per cent, a drop that puts it nearly 10 per cent below its record high.
European stocks were more than 4.7 per cent in the red after Asian shares slumped to 3-year lows as a three month-long rout in Chinese equities threatened to get out of hand. Oil plunged another 4 per cent, while safe-haven government US and German bonds, and the yen and the euro, rallied as widespread fears of a China-led global economic slowdown and currency war kicked in.
