Sensex recovers after initial slide following official reassurances.
The country’s financial authorities, led by the finance ministry, swung into action on Tuesday to calm the growing nervousness among investors.
The assurance that the Indian stock market is sound and that banks are well-capitalised and regulated had the required effect with the Bombay Stock Exchange’s Sensitive Index (Sensex) leading a late rebound in Asia, gaining 2.1 per cent to 12,860.43. That reversed a 3.5 per cent drop earlier on Tuesday and clawed back some of the 3.9 per cent slide yesterday.
The statements by the ministry, the Securities and Exchange Board of India (Sebi) and the Reserve Bank of India (RBI) came after the US markets fell sharply yesterday following the rejection of the $770-billion bailout package.
| ASIA | |||
| Sep 30 | Net Chg* | % Chg* | |
| Nikkei 225 | 11259.86 | -483.75 | -4.12 |
| Taiwan Taiex | 5719.28 | -210.35 | -3.55 |
| SET | 596.54 | -4.75 | -0.79 |
| Kospi | 1448.06 | -8.30 | -0.57 |
| Straits Times | 2358.91 | -2.43 | -0.10 |
| Hang Seng | 18016.21 | 135.53 | 0.76 |
| * over previous close | |||
The Dow, however, recovered on Tuesday — up 402.70 points at 12 midnight (IST) — after US President George W Bush indicated that a revised bailout package was expected.
| EUROPE | |||
| Sep 30 | Net Chg* | % Chg* | |
| FTSE 100 | 4902.45 | 83.68 | 1.74 |
| CAC 40 | 4032.10 | 78.62 | 1.99 |
| DAX | 5831.02 | 23.94 | 0.41 |
| US | 39720.00 | Net Chg# | % Chg# |
| Dow Jones | 10768.15 | 402.70 | 3.89 |
| * at close # at 12 midnight (IST) | |||
In India, Sebi Chairman CB Bhave was the first to brief the media at 10.30 am at North Block. Bhave said there were no settlement issues on the Indian stock market. “Yesterday’s settlement went through smoothly and it is expected that the settlement tomorrow will also be smooth,” he said.
Bhave also said there was no concern that institutions might be short selling.
Also Read
The Sebi chairman also warned that the regulator would take strict action if any institution was found violating the short-sale rule.
Within minutes, the Sensex staged a sharp recovery. The index, which had opened with a 400-point decline, trimmed its losses to 197 points.
Two hours later, RBI released a statement in Mumbai clarifying that the country’s second-largest lender, ICICI Bank, had sufficient liquidity, including in its current account with the central bank, to meet the requirements of its depositors. The statement added that RBI had arranged to provide adequate cash to ICICI Bank to meet its customers’ demands.
The statement came after reports in some sections of the media that depositors were withdrawing cash at automated tellers and the bank’s branches at some locations in Karnataka and Andhra Pradesh. “ICICI Bank and its subsidiary banks abroad are well-capitalised,” RBI said.
The statement led the ICICI Bank counter to reverse its initial slide and close the day with an 8.6-per-cent gain, the most in more than a week.
At around 1.30 pm, Finance Minister P Chidambaram told the waiting media: “People must be reassured by what Sebi and RBI have said. We are monitoring the situation round the clock. If regulations are to be tweaked, we will do so.”
Chidambaram said the Indian market was sound, attractive and well-regulated and that there was no cause for concern.
Responding to a query on foreign institutional investors (FIIs), the finance minister said many FIIs were selling because of payment obligations. “FIIs are not selling all the time. Some FIIs are buying, perhaps more will buy considering that India is a still a very attractive market to invest in.”
Chidambaram also sought to scotch rumours about ICICI Bank. “As far as we are concerned, I think some people are giving credence to rumours and unfounded apprehensions. I have maintained and repeated that all our banks are well-capitalised and well-regulated.”
The High-Level Committee on Capital Markets (HLCC), comprising financial sector regulators and finance ministry officials, will meet in Mumbai tomorrow to review the situation in the domestic markets in the wake of the global financial turmoil. This will be D Subbarao’s first HLCC meeting in his capacity as the RBI governor, while Arun Ramanathan, the new finance secretary, will also attend the review meeting.