At the end of Monday's trading on the stock exchanges, the government heaved a sigh of relief.
New Delhi: At the end of Monday's trading on the stock exchanges, the government heaved a sigh of relief.
Thanks to some fire-fighting by finance minister and his team of financial managers, the stock market crash on Monday that threaten to spoil the UPA party in the evening had been somewhat contained.
Amidst opposition politicians and investors groups asking for his regination, finance minister P Chidambaram swung into action that led in a 700 point recovery in BSE Sensex after it had crashed a huge 1100 points and had resulted in an hour-long suspension of trading at 11.56 am.
"We continue to monitor the situation", department of economic affairs secretary Ashok Jha said, adding that the ministry is in close touch with market regulatory SEBI, Reserve Bank of India and others.
Officials reckoned that the worst seemed to be over and the cash crunch facing brokers in meeting margin requirements, the primary reason for Monday's free fall, had been taken care of with banks making available adequate finance.
In a day of hectic parleys at damage control, the finance minister stepped in soon after trading got suspended on BSE and NSE. Emerging out of Parliament House, where he had declined to make any "off-the-cuff" remarks, Chidambaram told reporters that he had spoken to RBI governor Y V Reddy and the liquidity problem facing brokers was being taken care of by bank offering ample liquidity.
Seeking to instil confidence, he assured investors that there is no cause for panic and the economic fundamentals are strong. "Ordinary investors have no cause for panic," he said. "I ask investors to remain invested".
Although ministry officials wouldn't confirm, there were reports that state-owned insurance companies started buying in the market after domestic financial institutions were signalled to do so.
In any case, there were enough hints to them in media statements made by both the FM and later by Jhas.
Both emphasised the point that foreign institutional investors (FIIs) and mutual funds were net buyers in the market since Monday morning. Only some brokers trading on proprietary account may have come under margin pressure and, therefore, may have sold, they said.
Chidambaram reiterated that the fundamentals of the economy were strong: the foreign exchange reserves are at $ 163 billion; inflation stands contained at 4%, manufacturing growth is 9.1%; and CII business confidence index for April-September 2006 stands at 69.3% with an increase of 2.1 points.
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