New Delhi, October 8
Calming the worried investors who stampeded the stock market by selloff this morning, finance minister P. Chidambaram said fundamentally there was nothing wrong with the Indian economy.

“Fundamentals are still strong and the economy is humming with activity,” he said.

“The fall in Indian stock markets is happening in reaction to the US and other Asian markets,” he said and cautioned against any hasty decisions by investors.

He, however, assured that liquidity would be injected into the system, if needed.

“Markets are reacting to the statement of US Fed chairman Ben Bernanke yesterday evening and the manner in which Asian markets reacted this morning, we anticipated some impact on Indian markets,” Chidambaram said.

Painting a grim picture, Bernanke had yesterday said that recent financial developments suggest that the outlook for economic growth had worsened and that the downside risks to growth had increased.

“Every government is providing liquidity. To the extent liquidity is needed, we'll also provide. Not only India Inc but the whole of India should feel genuinely satisfied that the economy is growing and there should be no hasty or precipitous decision by individuals,” he said.

To buttress his arguments that fundamentals of Indian economy are strong, Chidambaram said there was high investment, many sectors were showing impressive growth, tax collection was good and exports as well as imports were rising, besides banks were well capitalised.

Quoting a report by the Centre for Monitoring Indian Economy (CMIE), the finance minister said cumulative investment was extremely high.

He informed that investment at the end of June 2008 was little over Rs 66 lakh crore against Rs 44 lakh crore at the end of June 2007.

Chidambaram also said all banks were well capitalised and capital adequacy ratio was between 10 per cent to 13.65 per cent, well above the Basel norms.

The finance minister said indirect tax collection were over the target and growing by over 14 per cent. Customs revenue collection for September were higher than the average for April-August.

On direct tax front, personal income tax collection have grown by 23.4 per cent and corporate tax collection by 35.3 per cent, he added.

The commerce ministry reported that exports have grown in dollar terms by 35.1 per cent in April-August, while imports have risen by 37.7 per cent, Chidambaram said.

Deputy chairman of Planning Commission, Montek Singh Ahluwalia said, “What is happening in stock market is a matter of concern to investors, I have no doubt about it. Many people who entered stock market last year would obviously be concerned over the fall in stock values. I am assuming that when normalcy is restored (in global financial markets), normalcy will be restored in stock markets.”

He, however, said fall in stock markets in India was not an exception as stock markets across the world had dropped 30-40 per cent.

He further said the condition of real economy could not be judged from the stock market as it was always more volatile.

Washington, October 8
Desperate to avoid a depression like the one witnessed in 1929, the US Fed in coordination with other central banks today announced a cut in key rates to stimulate consumption and economic activity.

The Fed has decided to lower its target for the federal funds rate by 50 basis points to 1.5 per cent, it said in a joint statement by six central banks.

The Bank of Japan expressed strong support for the decision, while China cut interest rates for the second time in less than one month to increase money availability in the market.

The US Fed's action comes in the light of evidence pointing to a weakening of economic activity and a reduction in inflationary pressures, the joint statement said.

"Throughout the current financial crisis, central banks have engaged in continuous close consultation and have cooperated in unprecedented joint actions such as the provision of liquidity to reduce strains in financial markets," said the statement issued jointly by the Fed, the Bank of Canada, the Bank of England, the European Central Bank, Sweden's Sveriges Riksbank and the Swiss National Bank. — PTI

London, October 8
Asian and European markets plummeted today with Japanese stocks hitting the lowest levels in over 20 years as the financial crisis deepened despite various governments extending bailout packages.

Japan's benchmark index Nikkei 225 plunged more than 9 per cent to touch its lowest level since 1987. It closed at 9,203.32, down 952 points.

Among the major losers on the Japanese bourse include auto giants Nissan, Toyota and Honda.

Further, another key Asian index — Hong Kong's Hang Seng dropped 8.17 per cent to 15,431.73 points.

The country's benchmark index fell despite the Hong Kong Monetary Authority cutting down interest rate to improve the credit situation.

South Korea's Kospi index nosedived nearly 6 per cent to 1,286.69 points, while China's Shanghai Composite index declined three per cent to 2,092.22 points and Singapore's Strait Times plunged over 6 per cent.

With bearish trends gripping the market, India's benchmark Sensex tumbled as much as 954 points during intra-day trade, falling below the psychological 11,000 level.

Analysts said the the meltdown across the global markets was due to the concerns that despite government efforts, the financial crisis has continued to deepen in the UK and the US.

After falling above 10 per cent, Indonesian stock exchange halted trading, as the country's benchmark Jakarta Composite Index fell 10.38 per cent to 1,451.67.

The suspension in trading is reportedly happening for the first time in eight years.

The bourses in Europe also plunged over 5 per cent amid the UK government's announcement of over £200 billion assistance to the financial institutions.

London Stock Exchange's FTSE 100 also opened on a weak note and was trading down over 5.12 per cent or 235.66 at 4,369.56 points, while the German Dax Index was trading deep in the red down over 6 per cent at 4,986.4 in the morning trade.

French CAC 40 Index was also trading down 6.50 per cent at 3,489.61 points. — PTI

London, October 8
The British government today announced a £50-billion emergency rescue plan to partly nationalise major banks, a day after the stock prices plunged raising investors fear about their survivability in the global financial meltdown.

Assuring that the move would help stabilise eight major British banks, Prime Minister Gordon Brown billed it as a "radical" plan to restore public "confidence and trust" in the financial system.

Under the move unveiled half an hour before the markets opened today, the treasury said it would be investing up to £50 billion in exchange for preference shares in eight of the country's largest banks and building societies: Abbey National PLC, Barclay's PLC, HSBC, HBOS, Lloyds TSB Bank, Royal Bank of Scotland, Nationwide Building Society and Standard and Chartered Bank.

Prime Minister Gordon Brown said: “Extraordinary times call for the bold and far-reaching solutions.”

“Our stability and restructuring programme is comprehensive, it is specific and it breaks new ground. This is not a time for conventional thinking or outdated dogma but for the fresh and innovative intervention that gets to the heart of the problem.”

And the government said it stood ready to make at least another £25 billion available for other eligible institutions.

The Bank of England also announced that it will also make available £ 200 billion in short term loans and issue £250-billion to guarantee loans between banks. — PTI

Mumbai, October 8
IT major Tata Consultancy Services (TCS) will acquire Citi's holdings in Citigroup Global Services Limited (CGSL) for $505 million in an all-cash deal.

CGSL is Citigroup's captive business processing outsourcing (BPO) arm. Under the agreement, TCS through CGSL will provide process outsourcing services to Citi and its affiliates aggregating an amount of $2.5 billion over a period of 9-1/2 years.

''This is a landmark acquisition for TCS, helping us not only acquire new capabilities in the banking domain but also underscoring the importance of our long-term, sustainable relationships with our large customers, including Citi,'' said S Ramadorai, CEO and managing director of TCS.

''This transaction will complement our domain expertise and bring new capabilities to TCS that will help drive growth going forward,'' he added.

TCS already provides a number of services like application development, infrastructure support, help desk, etc to Citi.

CGSL has more than 12,000 employees in India and expects to generate revenue to the tune of $278 million in 2008.

"TCS will offer CGSL stronger growth potential and superior continued services to Citi clients around the world," said Don Callahan, chief administrative officer of Citi.

"This transaction is expected to help reduce operating expenses related to business processing and will allow us to focus on our core financial services competencies.''

New Delhi, October 8
Foreign direct investment (FDI) in India jumped by 124 per cent to $14.6 billion in the first five months of fiscal 2008-09 despite meltdown in the global financial markets and investor confidence hitting new lows.

FDI of $2.32 billion in August was even more impressive, showing an increase of 180 per cent over the same month last year.

The cumulative FDI for April-August this fiscal was $14.6 billion, against $6.5
billion a year ago.

"This is unprecedented...this is a good sign in comparison to the global economic situation," commerce and industry minister Kamal Nath said after releasing the data.

He said while no country can remain "decoupled" from the global economic situation, India's FDI target of $35 billion for the current fiscal would be met.

"Of course there is a sentiment and frenzy effect of the global situation," he said, adding that with strong fundamentals "we have the confidence to tide over the global financial crisis".

FDI inflows last year were $24.57 billion. The manufacturing sector received $5 billion during April-August period showing a rise of 41 per cent over inflows.

"The good part is recipient sectors are manufacturing and infrastructure," he said.

Major investments included Royal Bank of Scotland, UK acquiring shares in Reliance Ports and Terminals Ltd (382 million dollar) and DE Shaw Composite Investment, Mauritius pouring 384 million dollar in DLF Assets Ltd.

Mauritius remained the top source of FDI accounting for 37 per cent of the total inflows while Singapore, US, UK and Cyprus were other major investing countries.

New Delhi, October 8
The continuing plunge on the stock market has halved the investor wealth from the level seen before the downslide began earlier this year, with promoters taking the biggest hit of more than Rs 20 trillion.

The total investor wealth, measured in terms of market capitalisation of all the listed companies together, today dipped to about Rs 36.5 trillion as against close to Rs 73 trillion on January 10 when the benchmark Sensex had scaled its life-time high.

In dollar terms, loss is bigger as rupee has depreciated sharply against US currency.

The cumulative market capitalisation of Indian companies stood at $1.8 trillion on January 10, which today came down to $760 billion, as rupee fell from 39.26 per dollar to near 48-level today.

The stock market benchmark Sensex today fell to as low as 10,750.76 points — its lowest in more than two years — before ending the day at 11,328.26 points after some recovery.

In the overall loss of close to Rs 36.5 trillion, the company promoters have seen an erosion of over Rs 20 trillion with their holding of about 60 per cent.

After promoters, FIIs have taken the biggest hit with a loss of over Rs 4 trillion, while retail investors have lost more than Rs 3 trillion.

The banks, mutual funds and insurance companies have also seen the value of their holdings plunge by close to Rs 3 trillion. — PTI

New Delhi, October 8
State-run ONGC today said it would borrow $1 billion to fund its proposed Rs 6,400-crore aromatic petrochemical complex at Mangalore.

ONGC Mangalore Petrochemicals Ltd (OMPL), a special purpose vehicle the state-run firm has created for the project, has mandated SBI Caps to arrange for the funds for the $1.52-billion plant.

It is adjacent to the company's 9.69 million tonnes refinery at the port city, a company official said. — PTI