Sensex nosedived by over 1740 points during the day and finally closed 1625 points down at 26,742. This is the biggest fall that Sensex has seen since 2009, and it is the third biggest fall ever. The Nifty too fell by over 500 points during the day but finally closed at 7809. The weakening rupee slumped by over 1 per cent to breach the 66.67 mark. Investors are estimated to have lost 7 lakh crore rupees.
Deep concerns about China’s slowing economy led to a fall in the markets all over the world. The Indian stock market crashed by a whopping 6.22 per cent because of global meltdown in one of the biggest sell-offs in recent years. All 50 constituents of Nifty were in red with Tata Motors and ONGC being the worst hit losing over six per cent in early trade.
Reserve Bank of India Governor, Raghuram Rajan tried his best to allay public fear. Finance minister Arun Jaitley also tried to assure the investors by saying that the government and the RBI was “watching the situation very closely and conscious of the responsibility, as
what is to be done.”
“There is not a single domestic factor in India which has either contributed to it or added to it. These are external factors. I have not the least doubt that this turbulence is transient and temporary in nature. The markets will settle down,” said Jaitley.
“I wish to reassure the markets that our macroeconomic factors are under control as the economy is in a much better position relative many other economies,” Rajan told the national banking summit organised by the IBA and FICCI here.
Rajan assured that India had USD 380 billion in forex reserves to be used when needed.
The Governor also hinted at lower rates, saying the RBI will look at emerging room for more accommodation on the back of lower commodity prices, astute food management by the government and strong anti-inflation policy stance of the central bank.
“Falling commodity prices and astute food management by the government should help RBI (lower rates)”, said Rajan.
On the falling rupee, which touched a new two-year low at 66.67, Rajan said that the Rupee had strengthened against some foreign currencies like the yen and the euro and that the RBI had resources to deal with the volatility.
The rupee crashed by a whopping 66 paise against the dollar in the opening trade. The fall came on the back of sustained capital outflow and the US dollar further weakening in the overseas market.
World markets are reacting strongly to worries about China’s economy slowing down more than estimated. Asian markets were in deep red and Shanghai crashed by almost 9 per cent.
Rajan also spoke about the slipping oil prices. And according to him, oil will remain at the current low level at least for a year or two.
Meanwhile, crude prices fell after slipping below USD 40 barrel for the first time in six years after a weak Chinese manufacturing data.