Sensex climbs 291 points out of Monday’s market carnage

MUMBAI: A day after one of the worst stock market crashes in six years, the Bombay Stock Exchange on Tuesday clawed back 291 points, reaffirming the broader view that Monday’s slide was due to global worries while Indian fundamentals remained intact.

Trading sentiments vastly improved toward the latter part of the day when China cleared an interest rate cut – widely expected after Monday’s bloodbath – sparking a recovery in the currency markets with the rupee gaining 55 paise to end at 66.10 to the dollar.

The forthcoming trend for India is likely to remain positive as the unfolding slowdown scenario in China pushes back the schedule for an interest rate hike in the US, as policymakers in Washington fret over the state of the global economy. This could imply foreign investors increasingly betting on India.

At a meeting of law firms, finance minister Arun Jaitley said the crisis presented an opportunity for India as the world required alternative engines for growth. “…can we convert this

MARKET SENTIMENTS IMPROVED FURTHER AFTER THE GOVERNMENT SAID IT WOULD MAKE FRESH ATTEMPTS TO GET THE GOODS AND SERVICES TAX BILL PASSED IN PARLIAMENT.

into an opportunity? Now can we? Wherever we are lacking in further reforms, can we just speed them up? (Can we) expedite our own expenditure”? he asked.

Market sentiments improved further after the government said it would make fresh attempts to get the goods and services tax bill passed in Parliament.

European markets corrected Monday’s fall with London’s FTSE, Germany’s DAX and France’s CAC trading up 3-4%. In Asia, the Hang Seng (Hong Kong) and Korea’s Kospi ended up around 1%, while Japan’s Nikkei ended down 4%; China’s Shanghai Composite Index continued with the fall, slumping more than 7%.

Apart from cutting its one-year lending rate by 25 basis points to 4.6%, China also lowered the cash reserve ratio, which reduces the amount of cash that banks must keep aside.

This will free up higher investible funds, a contrasting move to the August 11 depreciation of the yuan, which was aimed at tightening liquidity.

The devaluation was aimed at improving dwindling exports by making them cheaper, as the country’s main foreign markets in Europe grappled with a slowdown.

This situation is now widely expected to signify the start of the end of an exports-only economic model.