Markets hit by US sell-off in short term, says FM

Markets hit by US sell-off in short term, says FM

New Delhi: The stock markets have been affected by the US market sentiments in the short term, even though the country’s economy is robust and its growth story is intact, the finance minister said in a statement released after market hours on Friday.

Indian shares fell nearly 2% on Friday to log their fourth straight weekly loss, their longest weekly losing streak since the Lehman collapse, as fears that the US economy was heading towards another recession and that some European lenders were facing a short-term funding crunch triggered risk aversion.

The main 30-share BSE index, which is down 21% this year, dropped 5% on the week, extending its losses to 14% in four straight weeks.

“The effect of the market sentiments in the US and Europe has a bearing on our markets as well in the short term....In comparison to Asian markets, our performance has been better," Pranab Mukherjee said in the statement.

The steep sell-off in the Indian markets triggered by the economic crises in the United States and the euro zone had prompted a review of the global economic situation by top Indian policymakers including Mukherjee, RBI chief Duvvuri Subbarao and C. Rangarajan, a top adviser to the Prime Minister.

“The present crisis can, however, be expected to encourage increase in the equity exposure by foreign pension funds and other long-term institutional investors. India is well positioned to capture this flow," the statement added.

Net foreign institutional investor (FII) inflows into local stocks in this calendar year stood at $912.2 million until Thursday.

“India’s economy is robust and its growth story, intact," the statement added.

The comments come on the eve of a meeting of the planning commission, which will be chaired by Prime Minister Manmohan Singh.

The plan panel is expected to target an average annual growth rate of 9% for the five-year period starting from April 1, 2012.