Switching from selling India’s growth story to fire-fighting mode to stem a ‘nervous’ sell-off on the bourses, Finance Minister P. Chidambaram, on Thursday, sought to assure investors of the turnaround in the country’s economic fundamentals, and advised market participants to read the domestic environment correctly without getting influenced by external developments.
With the BSE and the NSE collapsing in a sudden spurt of selling following Federal Reserve Chairman Ben Bernanke’s statement on quantitative easing, Mr. Chidambaram asserted that the nervousness among stock investors was unwarranted. “We have been looking at what is happening in the market. We think that Mr. Bernanke’s statement has been misunderstood or misinterpreted...If we read the statement carefully, he has clearly indicated that he will continue with quantitative easing in the foreseeable future at about $85 billion a month or so,” he said.
While interacting with mediapersons here on the market slump, Mr. Chidambaram said: “...there is no need for any kind of nervousness. I am looking forward to June and the second quarter with much greater confidence. I think the Indian market should read the situation correctly rather than being influenced by something which is happening elsewhere.”
Nevertheless, in keeping with the mayhem in global stocks and tracking overnight losses in U.S. markets, the BSE Sensex plunged nearly 390 points to end below the 20,000-level with overseas investors stepping up selling across all counters. The Sensex finally ended the day’s rout by closing at 19,674.33, a fall of 387.91 points. Similarly, the NSE’s broad-based 50-share CNX Nifty also plummeted by 127.45 points to close at 5,967.05. Seeking to assuage investors sentiments as the economy can ill-afford a flight of FII capital at this juncture in view of the worrisome current account deficit, Mr. Chidambaram pointed out that the quantitative easing in Japan was continuing. There had been no change whatsoever as far as QE in Europe was concerned, he added. Besides, the foreign flows into India this May had been ‘extremely copious’.
Alongside, Mr. Chidambaram pointed to the improvement in the domestic economic situation with steady declines in wholesale and retail inflation. “...agriculture and labour-based inflation have come down, core inflation has come down, WPI headline inflation is below 5 per cent, CPI based inflation is coming down, inflows are copious and someone from the media told me that he is seeing more advertisement revenues in the last two weeks,” he said.
The Finance Minister, however, admitted that certain numbers coming out of China were ‘disappointing’ and also the quantitative easing programme in Japan could run into problems. “These are factors that are peculiar to the China market and the Japan market [and] they have no relevance at all to the situation in India,” he said.