ID :
24214
Mon, 10/13/2008 - 18:21
Auther :
Shortlink :
http://m.oananews.org//node/24214
The shortlink copeid
F.M. advises investors not to panic; market soars
New Delhi, Oct 13 (PTI) Finance Minister P. Chidambaram Monday promised more measures to infuse liquidity and advised investors not to act in haste or panic, a statement he made minutes before the market opened up by 495 points breaking a five-day streak of fall.
"Our banks are ready and willing to provide credit. Suitable advisories are being issued to the banks. We will respond swiftly according to the needs of the situation.
"We are working on measures that will infuse liquidity, make credit intermediation smoother and increase the confidence of depositors and investors. We hope to be able to announce them shortly," he said.
After the week-end mayhem in which the market tanked 800 points, Chidambaram went live on television channels expecting the stock market to take its cue from the "positive developments" of the Australian market and three of the East Asian capital markets opening on a 'bright note' Monday morning.
"We must remain confident and respond to the situation in
a cool and mature manner. We must banish fear. Especially
depositors have nothing to fear because their deposits in
banks are safe.
"Investors must take informed decisions. Before you
sell, you must remember that for every seller there is a
buyer. You must ask yourself why the buyer is buying in these
times of perceived uncertainty and, therefore, ask yourself
the further question whether there is a need to act in haste
or in panic. In my view, there is no reason at all to act in
haste or to give room for panic," he said.
Mentioning that already Rs 60,000 crore liquidity has
been infused into the financial system by Reserve Bank of
Indias' (R.B.I.) measures and that Rs 91,500 crore liquidity
adjustment facility exists, Chidambaram said the government,
R.B.I. and Securities and Exchange Board of India (S.E.B.I.)
were watching the situation carefully and coordinating their
actions.
Chidambaram said the high-powered committee of bankers
and experts, headed by Finance Secretary Arun Ramanathan,
would meet Monday for the first time to assess the liquidity
requirement.
"If all the players in the economy remain confident
and take informed decisions, I have no doubt that the Indian
economy will weather the current storm and emerge stronger,"
said the Minister, who had cancelled his visit Washington to
be available for monitoring and consultations.
He said the government, R.B.I. and S.E.B.I. had been in
close consultation with each other during the weekend. "I have
spoken to the Governor, R.B.I. and Chairman, S.E.B.I. several
times in the last two days. We are coordinating our actions,"
he said.
The root cause of the present uncertainty was
liquidity and not any dramatic change in the fundamentals of
the economy, he said giving the latest R.B.I. figures on
increasing non-food credit and growth in time and demand
deposits with banks.
"I am happy that the depositors continue to repose their
confidence in the health of our banking system. Nevertheless,
liquidity was found to be inadequate and, consequently,
lenders were unwilling to take risks.
"Some lenders and investors faced redemption pressures
leading to a sale of assets, especially stocks. The markets
that are bearing the problem are the capital market and the
money market and, to an extent, the foreign exchange market.
These problems can be overcome if adequate liquidity is
infused into the system," he said.
Accordingly, Chidambaram said R.B.I. took measures to
infuse an additional Rs 60,000 crore into the financial
system. Liquidity adjustment facility also provides liquidity
and as on October 10, Rs 91,500 crore had been accessed by
banks through the LAF window.
Chidambaram said, "We believe that these steps should
ease the liquidity situation and the flow of credit should
become smoother, relieving the pressures that had built up in
the last two weeks.
"I had two meetings with the Prime Minister in the last
two days, the last one was yesterday evening," he said.
Referring to the growth prospects in the current fiscal,
he said, "the economy continues to grow at a satisfactory
rate."
As last week, he said, the International Monetary Fund's
(I.M.F.) research department had noted that the Indian economy
would continue to do well despite the impact of the global
liquidity crunch.
According to I.M.F., he said, India is expected to post a
Gross Domestic Product (G.D.P.) growth of 7.9 percent during
the current fiscal year.
The Minister further said that though the stock market
indices are important indicators, "They are not the only
indicators of the health of Indian economy. The ratio of
investment to G.D.P. remains high at over 35 percent at the
end of first quarter of 2008-09."
Similarly, he added the monsoon has been normal; the
Kharif crop (especially rice and cotton) has been good;
farmers are sowing their fields; and the prospects for the
Rabi crops are bright.
Factories continue to produce goods and the services
sectsor is growing at a brisk rate, he said, adding "Crude oil
and commodity prices have declined sharply. This is expected
to have a beneficial effect on inflation."
"Our banks are ready and willing to provide credit. Suitable advisories are being issued to the banks. We will respond swiftly according to the needs of the situation.
"We are working on measures that will infuse liquidity, make credit intermediation smoother and increase the confidence of depositors and investors. We hope to be able to announce them shortly," he said.
After the week-end mayhem in which the market tanked 800 points, Chidambaram went live on television channels expecting the stock market to take its cue from the "positive developments" of the Australian market and three of the East Asian capital markets opening on a 'bright note' Monday morning.
"We must remain confident and respond to the situation in
a cool and mature manner. We must banish fear. Especially
depositors have nothing to fear because their deposits in
banks are safe.
"Investors must take informed decisions. Before you
sell, you must remember that for every seller there is a
buyer. You must ask yourself why the buyer is buying in these
times of perceived uncertainty and, therefore, ask yourself
the further question whether there is a need to act in haste
or in panic. In my view, there is no reason at all to act in
haste or to give room for panic," he said.
Mentioning that already Rs 60,000 crore liquidity has
been infused into the financial system by Reserve Bank of
Indias' (R.B.I.) measures and that Rs 91,500 crore liquidity
adjustment facility exists, Chidambaram said the government,
R.B.I. and Securities and Exchange Board of India (S.E.B.I.)
were watching the situation carefully and coordinating their
actions.
Chidambaram said the high-powered committee of bankers
and experts, headed by Finance Secretary Arun Ramanathan,
would meet Monday for the first time to assess the liquidity
requirement.
"If all the players in the economy remain confident
and take informed decisions, I have no doubt that the Indian
economy will weather the current storm and emerge stronger,"
said the Minister, who had cancelled his visit Washington to
be available for monitoring and consultations.
He said the government, R.B.I. and S.E.B.I. had been in
close consultation with each other during the weekend. "I have
spoken to the Governor, R.B.I. and Chairman, S.E.B.I. several
times in the last two days. We are coordinating our actions,"
he said.
The root cause of the present uncertainty was
liquidity and not any dramatic change in the fundamentals of
the economy, he said giving the latest R.B.I. figures on
increasing non-food credit and growth in time and demand
deposits with banks.
"I am happy that the depositors continue to repose their
confidence in the health of our banking system. Nevertheless,
liquidity was found to be inadequate and, consequently,
lenders were unwilling to take risks.
"Some lenders and investors faced redemption pressures
leading to a sale of assets, especially stocks. The markets
that are bearing the problem are the capital market and the
money market and, to an extent, the foreign exchange market.
These problems can be overcome if adequate liquidity is
infused into the system," he said.
Accordingly, Chidambaram said R.B.I. took measures to
infuse an additional Rs 60,000 crore into the financial
system. Liquidity adjustment facility also provides liquidity
and as on October 10, Rs 91,500 crore had been accessed by
banks through the LAF window.
Chidambaram said, "We believe that these steps should
ease the liquidity situation and the flow of credit should
become smoother, relieving the pressures that had built up in
the last two weeks.
"I had two meetings with the Prime Minister in the last
two days, the last one was yesterday evening," he said.
Referring to the growth prospects in the current fiscal,
he said, "the economy continues to grow at a satisfactory
rate."
As last week, he said, the International Monetary Fund's
(I.M.F.) research department had noted that the Indian economy
would continue to do well despite the impact of the global
liquidity crunch.
According to I.M.F., he said, India is expected to post a
Gross Domestic Product (G.D.P.) growth of 7.9 percent during
the current fiscal year.
The Minister further said that though the stock market
indices are important indicators, "They are not the only
indicators of the health of Indian economy. The ratio of
investment to G.D.P. remains high at over 35 percent at the
end of first quarter of 2008-09."
Similarly, he added the monsoon has been normal; the
Kharif crop (especially rice and cotton) has been good;
farmers are sowing their fields; and the prospects for the
Rabi crops are bright.
Factories continue to produce goods and the services
sectsor is growing at a brisk rate, he said, adding "Crude oil
and commodity prices have declined sharply. This is expected
to have a beneficial effect on inflation."
