Govt keeps watch on market, but no hasty steps

Synopsis

It expects investors to see through the short-term volatility and properly appreciate the country's robust macro-economic fundamentals, especially better medium-term growth prospects, compared to other major economies, he told ET.

New Delhi: The government is closely monitoring the volatility in stock markets in the wake of the onset of a global tariff war but will avoid any hasty steps or knee-jerk reactions, said a senior official.

It expects investors to see through the short-term volatility and properly appreciate the country's robust macro-economic fundamentals, especially better medium-term growth prospects, compared to other major economies, he told ET.

"The finance ministry is watching, market regulator Sebi (Securities and Exchange Board of India) is watching. There is no point pressing the panic button now, as it may be counter-productive," said the official, who did not wish to be identified.

"In these times, it's all the more important for global investors to see where the economic growth prospects lie and where the returns on investments would remain attractive over the medium-to-long term. India scores heavily on these aspects," he added.

Another person said Sebi is well-equipped to take any steps, whenever required, to curb excessive and undue fluctuations or market manipulations.

On Monday, the Sensex fell 2.95% to close at 73,137.9 points and the Nifty plunged 3.24% to 22,161.1, tracking a global sell-off fuelled by investors' concern about a potential recession in the US. Both the benchmark indices recorded their highest single-day declines since June 4, 2024.

The rupee, meanwhile, saw its worst slide against the US dollar in about three months on Monday. Analysts said global investors were dumping riskier assets, boosting the dollar.

Higher American tariffs on India's trade rivals and a likely realignment in global trade order could work out in the country's favour if it strikes a good deal with the US swiftly, the negotiations for which are in progress, analysts said.

The government had been expecting a stock market correction for some time now, anticipating the possibility of the global tariff war, said the official cited earlier.

Equity markets have fallen in recent months also because their stellar performance in the previous four years led to profit-taking. The Sensex, for instance, has shed more than 13% since October 2024.

The finance ministry has been cautioning against stock market correction since last year.

...moreless

...moreless