Volatility is part and parcel of capital markets
and the players will have to adjust themselves to the emerging situation, Minister of State for Finance Jayant Sinha said today.
"It is external factors which are causing volatility and turbulence which you have seen across these asset markets.
This will take time to play out, volatility is part and parcel of operating in these capital markets," Sinha told reporters on the sidelines of a CBEC event here.
He said the market players will have to work with the external factors whether it is the Chinese economy or a possible Fed rate hike or deflationary forces.
"All of this are playing themselves out in the capital markets
and asset prices will adjust themselves as this things play out," he said while reacting to the bloodbath in the stock markets today.
The BSE Sensex today plunged by over 1,600 points or nearly 6 per cent to close at 25,741.56. The rupee too slipped below Rs 66 a dollar.
"We are monitoring the situation very carefully whether it is in domestic, global markets, whether it is in fixed income, currency or equity markets, all concerned authorities are monitoring the situation quite carefully," Sinha said.
On what level of rupee the Finance Ministry is looking at, he said: "It is the market forces which sets the level of rupee. Our goal is to ensure this is done in an orderly way, so that there aren't any liquidity concerns. Let the adjustment process move in an orderly way. The rupee continues to be a favoured currency. It continues to be a strong currency".
Sinha said that the volatility in asset or currency prices will settle down. "There is volatility as prices reset. This is part and parcel of capital market. We haven't seen anything which suggest any major breaks, any major dislocations, it is an adjustment process".
He said that the readjustments are driving the oil prices down. "So this is a perfectly natural adjustment process in the market, they will settle down, India remains one of the strongest and best economies in the world right now".
On whether it is time for rate cut, Sinha said it is for RBI to take a call.
"All central bankers whether it is the RBI or the Fed are taking into account what is happening in other markets as well. Whether it is commodity prices, what's happening in China, global growth... All of that will be factored into by the RBI as well as Fed and other central banks," he said.
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