FM urges calm amid stock market rout

FM urges calm amid stock market rout
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First Published: Tue, Jan 22 2008. 12 12 PM IST
Updated: Tue, Jan 22 2008. 12 12 PM IST
New Delhi: Indian investors should stay calm in the face of sharp stock market falls for a second day as the fundamentals of the economy are strong and liquidity will not be a problem, the finance minister said on Tuesday.
Indian shares fell more than 11% in the first few minutes of trade on Tuesday as panic-stricken investors dumped stocks, setting off circuit breakers that automatically halted trade for an hour.
They trimmed losses once trading resumed but market sentiment remained extremely volatile.
At 0553 GMT, the market was down 6.56%.
“We had anticipated the market to open on a downward trend and hit the circuit breaker. My advice to investors is to stay calm,” Palaniappan Chidambaram told reporters.
“The economy will grow this year at close to 9.0% and even according to Dr. Rangarajan’s committee report it will grow 8.5% next year.”
Rangarajan heads the prime minister’s Economic Advisory Council, and last week released a report on the economy.
On Monday, shares had tumbled almost 11% to a four-month intra-day low, suffering their biggest intra-day points fall ever on margin calls and foreign selling, before paring their losses to end down 7.4%.
“There is no reason at all to allow the worries of the Western world to overwhelm us. Our economy is very different from some developed economies which are facing some stress,” Chidambaram said.
“I think when the market opens investors will come back.”
Last week, the Indian market shed 8.7%, its biggest weekly slide since May 2006.
India has grown at an average 8.6% in the past four years and is poised to grow at similar levels this year as well.
Dealers say the market was already short of cash after India’s largest initial public offering closed on Friday, and the situation was further compounded by margin calls following last week’s index fall of almost 9.0%.
“I am assured by the Reserve Bank of India as well as all the banks that enough liquidity has been provided and enough liquidity will be provided to brokers and other market players,” Chidambaram said.
“Liquidity will not be an issue,” he assured.
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First Published: Tue, Jan 22 2008. 12 12 PM IST