Government Monitoring of Stock Market Volatility
The government is observing the fluctuations in the stock markets due to the onset of a global tariff war, but it is exercising caution to avoid any hasty or reactive decisions.
- The government believes in the strength of India's macro-economic fundamentals and its better medium-term growth prospects compared to other major economies.
- The Finance Ministry and the Securities and Exchange Board of India (Sebi) are actively monitoring the situation.
- Pressing the panic button is seen as potentially counter-productive.
Investor Confidence and Market Prospects
Officials emphasize the importance for global investors to focus on where economic growth prospects are strong and where investment returns will remain attractive over the medium to long term.
- India is considered favorable in terms of economic growth and investment returns.
- Sebi is prepared to take necessary actions to manage undue market fluctuations or manipulations.
Recent Market Performance
On a recent Monday, significant declines were recorded in the Indian stock market:
- The Sensex fell by 2.95% to close at 73,137.9 points.
- The Nifty dropped by 3.24% to 22,161.1 points.
- These declines were the steepest single-day falls since June 4, 2024.
The rupee also saw a substantial slide against the US dollar, marking its worst performance in three months.
Global Tariff War and Potential Opportunities
Analysts indicate that higher American tariffs on India's trade rivals, coupled with a possible realignment in global trade, could benefit India if it secures a favorable trade deal with the US, negotiations for which are ongoing.
Stock Market Corrections and Government Caution
The government had anticipated the possibility of a stock market correction due to the global tariff war. Equity markets have been declining in recent months:
- The Sensex has dropped more than 13% since October 2024.
The Finance Ministry had been warning about the potential for stock market corrections since the previous year.