North block office, Ministry of Finance.
New Delhi: Attributing the slump in stock and currency markets to external factors, a finance ministry official Wednesday said more steps will be taken to check current account deficit (CAD) and hoped that the rupee would appreciate.
While the stock market benchmark Sensex in the early trade Thursday crashed over 1,000 points, the rupee fell to a record low of 74.45 to a dollar.
"What happened in US yesterday had a ripple effect here today. The IMF has downgraded global growth rate, US growth rate for next year, both these had impact on markets," the official told reporters.
The government will take action at an appropriate time to check widening CAD and going forward there are indications that oil prices will fall, which will have positive implications on the rupee.
"Rupee, Balance of Payments, CAD are the main worries, we have strategy in place to tackle situation. We will take action at opportune time on these issues," the official said.
He said Indian market is still relatively stable compared with other equity markets. "The rupee may remain firm if oil prices stay range bound. We do believe that rupee should appreciate from this level," the official added.
The BSE Sensex, in the opening trade, crashed 1,030 points to slip below the key 34,000-mark, tracking a global sell-off as the rupee hit yet another record low of 74.45 against the US dollar.
The rupee has lost more than 13 per cent since the beginning of 2018. The CAD, difference between inflow and outflow of foreign exchange, widened to 2.4 per cent of GDP in the April-June quarter.
The equity markets, however, pared losses in the afternoon trade and was trading 480 points or 1.74 per cent down at 34,281.
The official said that the oil prices are expected to stay range bound between 79-85 dollar a barrel in the months to come and the Indian economy will gain in the US-China 'trade war'.
Even though there are pressures on the current account deficit, the foreign exchange reserves are good enough to withstand it, he added.
"There is nothing to worry about the current market condition. Indian equity and rupee markets are impacted by external factors. Inflation is well within limits and the fundamentals of Indian economy remain strong," the official added.
He also said that the IMF have downgraded GDP projections for the US and China and hence India stands to gain.
The US Dow Jones Industrial Average slumped over 800 points or 3.15 per cent Wednesday, its biggest fall since February. US President Donald Trump blamed the drop on US Federal Reserve's decision to hike interest rates. "The Fed has gone crazy," Trump said yesterday.
Taking cue, the Asian stock indices too witnessed selling frenzy. Japan's Nikkei declined 4 per cent, Australia's benchmark ASX 200 fell 2 per cent, and Hong Kong's Hang Seng, China's Shanghai Composite was down more than 3 per cent.
The Indian market is still relatively stable compared with other equity markets as people still perceive strength in indian economy," the official said.
"There are countries in the world which are unstable in terms of stock markets going up and down, in terms of inflation going up, currency also depreciating, plus rising oil prices, so they are having all macro factors affecting many of the emerging market economies. But, in our case in spite of the oil prices going up, the prediction of RBI for inflation is modest, something which we think will be a very positive factor for India," the official said.