India has forex reserves to reduce market volatility: RBI chief
As stocks and rupee hit new lows on Monday, Reserve Bank of India (RBI) governor Raghuram said the country is in better position relative to many other economies.business Updated: Sep 22, 2015 11:57 IST
As stocks and rupee hit new lows, RBI Governor Raghuram Rajan said on Monday the country is in better position relative to many other economies.
He said that the central bank will not hesistate to use the country’s ample foreign exchange reserves to stabilize the rupee which has recently seen an adverse impact of the depreciation in the Chinese yuan.
“We have close to $380 billion in forex reserves. We will have no hesitation to use our forex reserves to reduce the volatility in the market.” Rajan said at a meeting organized by Ficci.
The governor also hinted at lower rates, saying the RBI will look at emerging room for more accommodation on the back of lower commodity prices, astute food management by the government and strong anti-inflation policy stance of the central bank.
"Falling commodity prices and astute food management by the government should help RBI (lower rates)," said Rajan. He also said he sees oil prices remaining at low levels at for a year or two.
He, however said rupee has strengthened against yen and euro, and RBI has resources to deal with rupee volatility.
The rupee, under stress from importers clamouring for dollars to meet debt payments has been weakened by the nervousness among global investors who have been buying up the dollar to make good their losses in emerging markets. Earlier on Monday, all markets in Asia – forex and equities- saw a major rout on fears that the slowdown in the Chinese economy is much worse than expected.
Feeble attempts by the Chinese government to prop up the securities market had little impact. The Chinese government allowed the country’s pension funds to invest in the stock market for the first time, in a bid to infuse fresh liquidity and to try and assuage concerns.
Rajan said that turmoil in currency market has been long-coming and China is only the last step in it.
In its biggest intra-day crash this year, the market benchmark Sensex plunged by 1,006 points while Nifty fell below 8,000 level in early trade due to heavy selling by funds amid global sell-off as worries about China's economy deepen.
Asian markets were also in deep red with Shanghai shares crashing 8% on concerns that the Chinese economy was slowing more than previously thought. Taking cues from global markets, the Sensex nosedived 1,006.54 points, or 3.67%, to 26,359.53-- the biggest fall in day trade in 2015. The broader Nifty also dipped below the 8,000-level by tumbling 309.05 points, or 3.72% to 7990.90 in early trade. All 50 constituents of Nifty are in red with Tata Motors and ONGC losing the most up to 6%.
Brokers said sentiments suffered a jolt following a sell-off in other Asian markets with over 8% plunge in Shanghai index.
Meanwhile, crude prices fell after slipping below $40 barrel for the first time in six years after weak Chinese manufacturing data.
(With inputs from PTI)
Read:Sensex falls over 1,000 points amid global rout, rupee at 2-year low
First Published: Aug 24, 2015 11:12 IST