Click to play videoNew Delhi: When the markets opened at 09:55 hrs IST on Friday, the Sensex and Nifty opened at stable levels. However, at 11:15 hrs IST, the RBI announced that key interest rates will be left unchanged in its credit policy.
Soon after the announcement at 12:20 hrs IST, the markets spiralled out of control and the Sensex broke below the 9,000 mark for the first time in two years.
Finance Minister P Chidambaram had to step in for some firefighting.
"Calm will return to the world markets and once calm returns, we will get back to higher growth trajectory. But as I said the monetary policy statement is not the last word. RBI has retained the flexibility to act swifly as and when necessary," Chidambaram said.
But his words could not douse the fire on Dalal Street. By 14:30 hrs IST, the Sensex had fallen over a 1,000 points, the Nifty over 300 points - the second worst falls in market history. In the last two weeks, the markets have been battling global bad news, lack of faith and flight of money. The RBI raised Cash Reserve Ratio twice and the repo rate once - pumping in about Rs 1,45,000 crore into the system. More action was expected on Friday, but none came.
CIO ICICI Prudential, Nilesh Shah said, "I think the market will be bit dissapointed because there was some pricing of liquidity enhancement measures. If in the credit policy RBI has made statements like deal with situations on a regular basis and will take apppropriate action at a regular period, it can then provide some sort of comfort to the market."
By evening, the man in charge of the country's Central Bank justified his inaction. What Governor Subbarao was aiming for was balanced macroeconomic growth rather than pandering to market sentiment.
"The current charge is to strike a balance between preserving financial stability and putting inflation expectation and sustaining price momentum. The global down turn may be deeper and recovery long than expected earlier. Consequently the adverse implication is to create a financial channel for emerging economies including india," he said.
It's been a Black Friday for markets, but the worst may be far from over as the UK steers towards recession. People are now hoping that Samvat 2065 - the start of the new trading year on Diwali - will bring some relief.
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