Click to play videoNew Delhi: The global financial crisis is also having an impact in India with the index for industrial production (IIP) numbers for August at a mere 1.1 per cent as opposed to the over 10 per cent in August last year.
At the opening bell on Friday, the Sensex and the Nifty hit two-year lows and the Union Finance Minister P Chidambaram stepped in to allay fears.
The Reserve Bank of India, too, got into the act by cutting the Cash Reserve Ratio by 100 basis point to 7.5 per cent to make more liquidity available.
The move will release Rs 60,000 crore to improve liquidity. But the share markets continued to fall further in panic and the Finance Minister had to send in his top official to soothe the markets.
"We have identified that the main problem is liquidity and we have assured the people that we will respond swiftly and take steps to infuse more liquidity according to the needs of the situation," Finance Secretary Aruna Ramanthan said.
After the mayhem in the share market, the IIP figures came as the next big shocker.
"This 1.3 per cent which you are talking about is really a significant deceleration. We all had a fear that there would be industrial recession and maybe we will have to revise the growth forecast now that there is a global financial crisis. And then of course in the Indian situation we have serious liquidity crunch," senior economist Chandrasekhar Rao said.
But the markets continued to fall and at one point of time fell by over 1000 points.
Sebi Chairman CB Bhave and the Finance Minister were back with more talk.
"We have not seen any event in the market with regards to the margins that are available from the brokers and all that should alarm us. We are keeping a close eye on this," Bhave said.
"IIP numbers should be taken as just one input. We should look at many other numbers. At this stage it is difficult to say what impact on macro economy will be but I am confident that our economy will still grow at a very satisfactory level," Chidambaram said.
The markets listened to the financial evangelists and pulled back from the lows but still ended in the red. It was also worst weekly fall for the Indian stock markets ever.
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