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Indian markets soar on global cues, government assurances

Business News

Oct 13, 2008, 11:53 GMT

New Delhi: Indian equities surged 7.6 per cent Monday on strong global cues as well as assurances by
Finance Minister P Chidambaram who insisted the fundamentals of the Indian economy were strong.

"This is a time of uncertainty. Yet in a time of uncertainty, some facts cannot and ought not to be
ignored," Chidambaram told a press conference, where he noted the Indian economy continued to
grow at a satisfactory pace.

"The stock market indices are important indicators but they are not the only indicators," the minister
said before the markets opened. He stressed that despite the downturn the Indian economy was
predicted to grow 7.9 per cent during the current fiscal year.

Mentioning that the investment rate was high and tax collections were on the rise, Chidambaram said
the root problem in the present uncertainty was liquidity, which would be addressed by both fiscal and
monetary measures.

Recent cuts announced by the central Reserve Bank of India in the cash-reserve ratio, or minimum
cash to be held by the banks, was a step in that direction.

Chidambaram's attempt to soothe investors, saying there was no reason for panic, lifted market
sentiment leading to the benchmark Sensex index to 11,170 at noon (0630 GMT), for a gain of 6.1 per

It maintained its upward march and closed the day's trade at 11,332.23, soaring 804.38 points or
7.64 per cent - its highest intra-day gain since March.

Blue-chip stocks led by banking and capital goods sectors recorded significant gains amid surging
Asian bourses.

All the 30 shares including ICICI Bank, HDFC Bank, Reliance Energy and State Bank of India that go
into the basket of Sensex shares were trading positive.

Similarly, the broader 50-share Nifty index gained 6.43 per cent to 3,490.70, up 210.75 points from
its previous close on Friday.

"Concerted European action to strengthen the banking system has given the much-needed confidence
that investors were looking for," Jagannadham Thunuguntla, head of the capital markets arm of
India's share brokerage house SMC Group, told the IANS news agency.

The Sensex had taken a heavy beating last week - finishing the week's trading at 10,527.85, down
1,998.47 points, nearly 16 per cent, over the previous Friday at 12,526.32.

Credit rating agency Crisil estimated Indian stockholders saw investments of over 2.3 trillion rupees
(over 50 billion dollars) being wiped off in September, while another estimate said 10 top Indian
companies lost 1.23 trillion rupees (25 billion dollars) in market capitalization last week.
ICICI, the country's largest private sector lender, said it had sufficient liquidity and insisted that
depositors' money was safe.

In an interview with NDTV Profit news channel, ICICI Bank chief executive KV Kamath called it
"significantly overcapitalized" and profitable.

Persistent rumours that India's leading private banks could go bust owing to big exposures in foreign
markets had battered ICICI share prices last week as it slid by nearly 20 per cent on Friday.

Kamath said the bank will not be "cowed down" by rumour-mongering and alleged that it had
evidence of organized efforts to destabilize the bank.