Amidst fear of stock market taking a plunge on global cues, Finance Minister P Chidambaram on Monday morning asked the investors not to panic, an assurance that pulled up the Bombay Stock Exchange benchmark Sensex by 495 points in the initial trade.
"I expect market to take cues from positive developments in three East Asian and Australian bourses," he told newspersons ahead of the opening of bourses.
While assuring the nation that economic fundamentals are strong, he said, government would announce more measures to address the problem of liquidity.
Meanwhile, the 30-share index moved up 495 points and regained 11,000 mark at 1015 hrs.
The Finance Minister said, "We are working on more measures that would infuse liquidity....And increase the confidence of depositors and investors. We hope to be able to announce them shortly."
Referring to the banks, he said, they are ready and willing to provide credit. "Suitable advisories are being issued to the bank."
Pointing out that government RBI and SEBI have been in close consultation with each other during the weekend, Chidambaram said, "We are coordinating our actions. We are watching the situation carefully and will respond swiftly according to the needs of the situation."
The minister further said if all the players take informed decision, the Indian economy will "weather the current storm and emerge stronger".
The Finance Minister also asked the investors to "banish the fear" and respond to the situation in a cool and mature manner.
The depositors, he said, have nothing to fear because there money in banks are safe.
To an investor, he asked them to take informed decision saying, "before you sell you must remember that for every seller there is a buyer.
You must ask yourself why the buyer is buying in these times of perceived uncertainty and, therefore ask yourself the further question whether there is need to act in haste or panic. In my view, there is no reason at all to act in haste or to give room for panic."
The Minister further added that the Australian capital market and three of the East Asian capital markets have opened on bright note this morning and said, "I expect that our capital market will also take its cue from these positive developments."
Chidambaram noted that the root cause of the present uncertainty is liquidity and not any dramatic change in the fundamentals of the economy.
According to RBI figures, as on September 26, 2008, non-food credit increased, year-on-year, by 24.8 per cent, he said, adding, between April and September 26, non-food credit grew by 7.8 per cent.
Subsequently, time and demand deposits with banks grew, year-on-year, by 18.8 per cent and, between April and September by 7.2 per cent.
"I am happy that depositors continue to repose their confidence in the health of our banking system," he said.
On the GDP, Chidambaram said, as per the IMF forecast India is expected to post a growth of 7.9 per cent this year.
The Minister further said that though the stock market indices are important indicators, "They are not the only indicators of the health of the Indian economy. The ratio of investment to GDP remains high at over 35 per cent at the end of the first quarter of 2008-09."
Similarly, he added the monsoon has been normal; the Kharif crop (especially rice and cotton) has been good; farmers are sowing their fields; and the prospects for the Rabi crop are bright.
Factories continue to produce goods and the services sector is growing at a brisk rate, he said, adding "Crude oil and commodity prices have declined sharply. This is expected to have a beneficial effect on inflation."