The fear psychosis that gripped Indian share markets as well as other markets in last few days has been able to bring under control after Finance Minister Chidambaram and other government heads gave assurance on the country’s financial status. The FM reassured the government was in a strong position to react appropriately as and when the problem occurred.
India’s leading private sector bank ICICI head, Kamat strongly denied rumors that his bank was heavily exposed to the wrecked banks in the US and the UK. He stated the bank had no liquidity crisis as it had $20 billion in government securities, in addition to its global subsidiaries’ $2.5 billion in cash. The bank, India’s largest in the private space, was also over-capitalized and was one of the strongest financial institutions in the world, Kamat added.
The bank has already filed a case against a rumormonger who sent bulk SMSs from a certain IP address to spread the rumor to stoke run on the bank. ICICI was the worst affected during the recent blood bath in the Indian bourses.
Earlier Chidambaram appealed investors to stay calm, and asserted that India was fundamentally strong as far as market demands were concerned. He further added the government was working on measures that would infuse liquidity, made credit intermediation smoother and increased the confidence of depositors and investors. To bring back the confidence in the investors he pointed out the Reserve Bank of India had already injected $15 billion to the system to tide over any untoward financial causalities.
According to business analysts, at present India is affected by lack of market confidence with global recession reports. However, they claim India as compared to other developed and other emerging economies the country has strong economic fundamentals to ward off any long term slow down. They further added since India was integrated to the global economy the country would be impacted by the crises immediately, but that would last only 9 months to one year as the country has immense potential to grow within.
Chidambaram’s assurance had immediate takers, with the bourses moving up significantly. This is the first time the stock exchanges across the country reacted so strongly towards to his words as compared to earlier occasions during his term as finance minister. Bombay Stock Exchange closed at a high of 11329.11 with a whopping 7.6 % rise from its opening level. Likewise, the National Stock Exchange too considerably moved up by 6% to register 3490.70 at the index.