Mar 15, 2008

Woes of the West should not worry us: FM

NEW DELHI: Finance minister P Chidambaram chose to temper down concerns of rattled investors, exuding confidence in the strong economic fundamentals of the economy.

In a bid to boost investor confidence during the frenzy in the markets, the FM on Tuesday reassured investors that the fundamentals in the economy were still strong.

Mr Chidambaram said, "Worries of the western world should not be allowed to overwhelm us." There is no ground for sentiments to be negative in the long run as fundamentals of Indian economy are strong.

"We will grow at 9% this year. Even the Rangarajan Committee of the Prime Minister's Economic Advisory Council has said we will grow at 8.5% next year," he added.


"We had anticipated that markets will open today (on Tuesday) on a downward note and may hit the circuit breaker," Mr Chidambaram said in New Delhi, after exchange authorities suspended trading due to a fall in stock prices, minutes after the bourses opened.

"I am assured by RBI and all the banks that enough liquidity will be provided to brokers and market players. Liquidity will not be an issue," Mr Chidambaram said. Banks have reported that investments in the economy are running very high as the demand for credit is strong, he said.

"RBI has stated that investment in pipeline is also strong. Fundamentals of the economy are very sound. Corporate profits are high and corporate income-tax is at an all-time high," he said.

Mr Chidambaram refrained from advising whether institutions should buy stocks, and said, "We are not advising institutions to do this or that. Institutions are good judge of what are valuations today." However, he said analysts and advisers have advised investors to stay calm. Ahead of his visit to Davos for the World Economic Forum, he exuded confidence that investors would return to market as fundamentals of the economy were strong.

Retail investors typically contribute 10% to 20% of their purchase, with brokers providing the remainder. When the market slumps, the initial 10% investment is wiped out, so financiers demand cash deposit, a margin call, or sell the client's remaining holdings to recoup the losses.

"I am sure investors will take informed and matured decisions and not give any room to unwarranted apprehensions and market rumours," he added.