The Hindu Business Line : Reddyspeak brings some relief to markets

Mumbai, June 23 The equity markets which fell by more than 270 points saw a short recovery in intra-day trade on Monday, on cues that no monetary tightening measurers are expected, at least for the day.

Markets were rife with talk, earlier in the day, that the Reserve Bank of India may announce some measures following the Governor, Dr Y. V. Reddy’s meeting with the Prime Minister and the Finance Minister, on Saturday.

While speaking to reporters in Pune on Monday, Dr Reddy said, “The RBI will continue to take determined and calibrated measures, as and when warranted, with a focus on managing expectations and on enabling adjustments in the economy in response to the oil shock.”

There was some short covering at lower levels, which led to the recovery. But it was short-lived as the markets closed weak.

The benchmark index Sensex closed at 14,293.32, down 1.91 per cent since its previous close.

Dr Reddy said that India was safe in regard to the financial and external sectors and the outlook on the food front was optimistic. Fuel prices are the main problem for the high inflation in India, and this can be tackled by macro policy.

“We now have, by and large, a good overall supply-demand position domestically. This is a source of strength in managing this unprecedented shock from global oil markets,” he said.

The rupee as well as the government securities markets recovered some of their intra-day losses after the Governor said that RBI had ensured orderly conditions in the money, government securities and foreign exchange markets on a continuous basis through its operations in these markets.

“The RBI wants to avoid panic. This is an indirect warning to market participants that it will not permit any undue volatility in the market,” said a treasury official from a private bank.

Bond prices fell 85 paise in intra-day trade but closed only 10 paise lower. Similarly, the annualised forward premia which crossed 4 per cent during the day, ended lower.