Mumbai/New Delhi: As stock markets and rupee dropped like ninepins, government and RBI Monday sought to assuage jittery investors citing strong domestic macroeconomic fundamentals and blamed global turbulence for the "temporary" crash.
Finance Minister Arun Jaitley said the government and the RBI are keeping a watch over the situation and expressed hope that things will stabilise once the transient impact is over.
"There is not a single domestic factor in India which has either contributed to it or added to it. These are external factors. I have not the least doubt that this turbulence is transient and temporary in nature. The markets will settle down," Jaitley said.
Reserve Bank Governor Raghuram Rajan said the country has strong macroeconomic fundamentals and sufficient forex reserves to contain volatility.
"I just want to indicate that we have plenty of reserves which was USD 355 billion (at the last count), plus USD 25 billion that exist because some of our forward sales. We have got USD 380 billion to play with," Rajan told a banking summit in Mumbai.
"I wish to reassure the markets that our macroeconomic factors are under control as the economy is in much better position relative to many other economies," the Governor said.
Rajan also hinted at a rate cut given the low inflation, record low crude and other commodity prices. "We will strive to give you the lowest interest rates that is consistent with our effort at bringing inflation under control."
In the worst-ever crash in stock markets, Sensex today plunged by 1,624.51 points at 25,741.56 -- its lowest level since August 2014 -- and nearly Rs 7 lakh crore got wiped out from the investors' wealth.
Meanwhile, the rupee tumbled sharply by 82 paise -- its biggest single day fall this year -- to settle at 66.65 against the dollar.
Brokers put down the massive fall to the meltdown in global markets, with Asian bourses ending in deep red.
While asking market players to work with external factors like concerns over Chinese economy or possible US Fed rate hike, Minister of State for Finance Jayant Singh said that volatility is part and parcel of capital markets.
"It is external factors which are causing volatility and turbulence which you have seen across these asset markets. This will take time to play out, volatility is part and parcel of operating in these capital markets," Sinha said.
Finance Secretary Rajiv Mehrishi said investors are worried over China and the government will do every thing to reassure investors.
Mirroring heavy losses in Asian markets, foreign institutional investors withdrew a net Rs 5,275 crore from the stock markets, as per provisional exchange data.
However, domestic institutional investors were net buyers of shares worth Rs 4,000 crore.
Led by Chinese rout, global stock markets plunged and commodity prices hit new lows with European and the US markets dropping up to 7 percent in day trade.
Since August 11, when China devalued its currency, global investors have lost more than USD 5 trillion in equities.
As global markets are in deep red, domestic stock markets are expected to remain weak tomorrow as well, analysts said.
