Business | Markets
India moves to reassure investors as markets rally
India's finance minister moved to reassure markets on Sunday the government was trying to shield the economy from the global financial crisis, sparking a rally in the country's battered stock market and currency.
- Agencies
- Published: 23:28 October 13, 2008
New Delhi: India's finance minister moved to reassure markets on Sunday the government was trying to shield the economy from the global financial crisis, sparking a rally in the country's battered stock market and currency.
Shares of ICICI Bank, India's second largest lender, surged over 20 per cent after the chief executive said deposits were safe. Concerns about ICICI's potential exposure to the global credit market turmoil has erased 70 per cent of its market value this year.
Fears about the crisis, which has wrecked financial firms across Europe and the United States, has gripped Indian markets, driving interbank lending rates to a 19-month high on Friday as liquidity dried up and banks shrank from dealing with each other.
Finance Minister Palaniappan Chidambaram appeared to address some of those concerns when he said the government, the central bank and the stock market regulator were coordinating on an hourly basis on a response to the crisis.
"We are working on more measures that will infuse liquidity, make credit intermediation smoother, and increase the confidence of depositors and investors," he told a news conference.
"We hope to be able to announce them shortly."
Interbank lending rates fell, helped by a central bank decision to cut the proportion of deposits banks must keep in reserve by 150 basis points to 7.5 per cent, releasing about Rs600 billion from Saturday.
Overnight cash rates were quoting at 9.75/10.00 per cent yesterday, compared with Friday's close of 15.50-16.50 per cent.
"We are watching the situation carefully and we will respond swiftly according to the needs of the situation," Chidambaram said.
"Our banks are ready and willing to provide credit," he said. The 10-year bond yield was at 7.71 per cent, below 7.75 per cent earlier and down from Friday's close of 7.79 per cent.
The rupee gained to Rs48 per dollar from 48.11/12 per dollar, boosted by state-run banks buying rupees on behalf of the central bank on Friday.
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