In a highly volatile trading on Tuesday, Indian
stock markets dipped for the sixth day in a row even as the government sought to soothe investor nerves, saying that the Indian economy's strong fundamentals would help it survive chills of the
global financial turmoil.
The words of assurance helped arrest the market decline, triggered by debt crisis in the US and Europe, and stocks recovered smartly from their early morning lows. Initial positive cues from European markets also helped.
However, uncertainties in the global financial markets eventually prevailed over the market sentiments.
A see-saw trade was seen in the forex market as well, and the Indian rupee extended its losses for the sixth straight session today. It fell another 23 paise to its lowest level in over 10 weeks of 45.20/21 against the American dollar.
Heavy capital outflows too put pressure on the rupee as Foreign Institutional Investors (FIIs) sold shares.
At the same time, gold continued to gain ground and moved closer to Rs 26,000-mark per 10 grams.
After opening 472 points down this morning, the Sensex widened its loss to 558 points within minutes. Thereafter, it recovered more than 700 points from early morning lows and was trading with a gain of over 100 points at one point of time.
However, it soon turned negative with over 300-point loss and after partial recovery closed 132.27 points down at 16857.91 -- lowest level since June 9, 2010.
Amid all the market volatility, Finance Minister Pranab Mukherjee told reporters, referring to Monday's Goldman Sachs report, "I would like to emphasis that some of the investment banks have upgraded India to market weight, that means the basic fundamentals are strong and macro-economy recovery is moving toward a positive direction."
Mukherjee said India's economic fundamentals were strong and the country was capable of meeting challenges - posed by the downgrade of the US economy by credit ratings agency S&P on Friday and the continuing crisis in some euro-zone nations.
Besides, Capital Market Joint Secretary Thomas Mathew asserted that FIIs were unlikely to resort to heavy selling.
He also said that there could be some volatility in the next few days, but it would be manageable.
Marketmen said the government assurances helped in the brief recovery, despite the negative global cues pulling down investor sentiment.
Mukherjee said that recovery was much better than other Asian countries, but added that it was too early to say how the markets would behave in future.
The global markets have been in turmoil for the past two days, after the creditworthiness of the US was downgraded by Standard and Poor's amid the American economy's mounting debt worries. The debt problems in Europe have already been hammering the market for about a week now.
The overnight meltdown in the US and the subsequent fall in Asia this morning added to the woes of Indian bourses.
However, after falling nearly six per cent yesterday - steepest since December 2008 global financial meltdown - the US markets bounced back in early trade on Tuesday. Experts said this could positively impact Indian stocks on Tuesday.
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