New Delhi/Mumbai, Oct 15 : India pumped liquidity into its markets and took measures aimed at helping its 106 billion dollars mutual-funds industry as its rupee and stocks rallied after governments worldwide moved to restore confidence in the financial sector.
Reserve Bank of India (RBI) Governor Duvvuri Subbarao who met Finance Minister P. Chidambaram here said market situation was under control but did not comment on what more measures might come.
Subbarao later met Prime Minister Dr. Manmohan Singh along with P. Chidambaram but did not make comment further.
Subbarao spoke after markets closed. But they mostly reacted positively to the steps, with the partially convertible rupee closing up 0.4 per cent at 48.04/06 per dollar and the main share index ended up 1.5 per cent, building on a 7.4 per cent gain the previous session.
India's financial markets were badly shaken last week as the global financial crisis spread, with stocks falling almost 16 per cent, the rupee hitting a record low and overnight lending rates leaping to 23 per cent.
The RBI cut the amount of funds banks must keep in reserve on Saturday, releasing more than 12 billion dollars into the banking system, and on Tuesday it injected 13 billion dollars via its daily overnight money market operations and introduced a temporary funding window for mutual funds.
The RBI conducted a special 15-day repo-auction on Tuesday to meet the liquidity needs of mutual funds, whose investors have pulled money out to pay tax bills and due to the global financial markets turmoil.
In the auction, which was to banks specifically for lending on to funds, saw only 35 billion rupees taken up against 200 billion rupees on offer. Meanwhile, all leading industrial lobby asked the Central Government to raise the tax on exports of iron ore, a key demand of steel firms facing falling margins, to increase supplies and help lower prices.
"ASSOCHAM and other chambers have already requested the Finance Ministry to withdraw those things because those were done at the time when steel prices were very-very high and so those measures were taken. But today there's a need to withdraw those measures," said Sajjan Jindal, president, the Associated Chambers of Commerce and Industry.
Leading steel makers have asked for the tax to be lifted to 35 per cent from 15 per cent as they try to reduce input costs at a time when the government has leaned on them for months not to raise prices as it fights double-digit inflation.