Touching a two-year low, the stock market slumped nearly 6 per cent yesterday. While FinMin blames global turbulence, RBI Governor says the Indian economy is in better shape than many other countries
The benchmark Sensex yesterday took the bloodiest blow of its lifetime, crashing 1,624.51 points — its biggest single-day fall — ending below 26,000 on heavy outflows as the rupee sank 82 paise to a fresh 2-year low of 66.65.
Manic Monday: Arun Jaitley termed the market crash ‘temporary and transient’ and urged investors to not lose hope , as the government and the RBI are closely watching the situation and will soon control the mayhem. Pic/Sameer Markande
The index ended the day 5.94 per cent down at 25,741.56 points as jittery investors sold off shares across all sectors.
This is the weakest closing for the Sensex since August 11, 2014, when it closed at 25,519.24. The barometer has now retreated by 2,190.08 in three straight sessions.
The broader NSE Nifty cracked below the 7,900-mark by tanking 490.95 points, or 5.92 per cent, to 7,809 at close. The total investor wealth, measured in terms of cumulative market value of all listed stocks, plunged nearly R7 lakh crore, which crashed below the R100-lakh crore mark to end the day at R95,28,536 crore.
Brokers put down the massive fall to the meltdown in global markets, with Asian bourses ending in deep red. Shanghai shares closed 8.49 per cent down while European markets were weaker by close to 3 per cent in early trade as the slowdown in China stoked concerns about the health of its economy and rattled investors.
Gold prices surge
Global crude oil too went below the $40 per barrel mark amid weak Chinese manufacturing growth and global oversupply. Extending its two-week winning streak, gold surged R150 to hit a three-month high of R27,575 per 10 grams in the national capital on seasonal buying by jewellers as investors fled the stock market.
The rupee crashed below the crucial 66 mark by falling 90 paise to close at a two-year low of 66.73 against the dollar due to heavy demand for the US currency from importers and some banks. Foreign portfolio investors net sold shares worth Rs 2,340.60 crore on Friday, as per provisional data.
Blame the Chinese
Market expert Akash Jindal said that the main reason behind the Dalal Street bloodbath are global factors, specially the Chinese economy.
Jindal said, “The way Sensex has crashed and the rupee fell, it is a reflection of the Chinese economy. The data coming from the Chinese economy is quiet poor, and that has shown reflection in the world economy, including India.”
Terming the 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. He 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. There is not a single domestic factor that has either contributed or added to it. I have not the least doubt that this turbulence is transient and temporary in nature. Markets will settle down,” he said. “Our fiscal deficit figures are under control. Inflation is very much under control. We stand by the growth projections,” he added.
India is in a good position, says RBI
Reserve Bank Governor Raghuram Rajan yesterday allayed fears and assured investors that this market volatility can be dealt without panicking. He said, "I wish to reassure the markets that our macroeconomic factors are under control as the economy is in a much better position relative to many other economies.”
Forex to rescue
The country has $380 billion in forex reserves to be used as and when the need arises. He also hinted at lower rates, saying the RBI will look at emerging room for more accommodation on the back of lower commodity prices, astute food management by the government and strong anti-inflation policy stance of the central bank.
‘We can deal with this’ Talking about the rupee fall, Rajan said that the turmoil in the currency market has been long coming and China is only the last step in it. Rajan however said the rupee has strengthened against the yen and euro, and RBI has resources to deal with rupee volatility.