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Seeking to soothe the jittery market, a senior Finance Ministry official assured that there is a strategy in place and appropriate steps will be taken at right time to boost the stock market sentiments. He also expressed hope that crude prices will come down.
The BSE Sensex lost over 750 points and NSE Nifty shed over 200 points on Thursday.
Following his comments, the indices recovered albeit for a short while as European markets opened lower and US future also showed weaknesses. Finally BSE Sensex though managed to close slightly above 34,000 level, lost 759 points from Wednesday closing and NSE Nifty closed at 10,235 after losing 225 points.
“What happened in US yesterday had a ripple effect here today. The IMF has downgraded global growth rate, US growth rate for next year, both these had impact on markets,” the official told reporters. The government will take action at an appropriate time to check widening CAD and going forward there are indications that oil prices will fall, which will have positive implications on the rupee.
“Rupee, Balance of Payments, CAD are the main worries, we have strategy in place to tackle situation. We will take action at opportune time on these issues,” the official said. He said Indian market is still relatively stable compared with other equity markets. “The rupee may remain firm if oil prices stay range bound. We do believe that rupee should appreciate from this level,” the official added.
The rupee has lost more than 13 per cent since the beginning of 2018. The CAD, difference between inflow and outflow of foreign exchange, widened to 2.4 per cent of GDP in the April-June quarter. The official said that the oil prices are expected to stay range bound between $ 79- $ 85 a barrel in the months to come and the Indian economy will gain in the US-China ‘trade war’.
According to the official, even though there are pressures on the current account deficit, the foreign exchange reserves are good enough to withstand it. “There is nothing to worry about the current market condition. Indian equity and rupee markets are impacted by external factors. Inflation is well within limits and the fundamentals of Indian economy remain strong,” he said.
"There are countries in the world which are unstable in terms of stock markets going up and down, in terms of inflation going up, currency also depreciating, plus rising oil prices, so they are having all macro factors affecting many of the emerging market economies. But, in our case in spite of the oil prices going up, the prediction of RBI for inflation is modest, something which we think will be a very positive factor for India,” the official said.
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