New Delhi, May 17: The finance ministry swung into action to stem the slide in stocks after a brief powwow this morning between Manmohan Singh, who is widely tipped to take over as finance minister, and the lameduck incumbent Jaswant Singh.

Soon after the sensex plunged by a historic 15.6 per cent in two short and frenetic selling sessions — the biggest one-day fall in the 129-year history of the Bombay Stock Exchange — Jaswant instructed capital market regulator, the Securities and Exchange Board of India (Sebi), and the Reserve Bank of India to monitor developments and keep an eye on the stock markets.

Government sources said the finance ministry has instructed domestic financial institutions to intervene and scoop up shares to revive the market which ratcheted up the indices but still ended up in negative territory at the close of trading.

“Around noon, we did receive instructions from the finance ministry to step up our buying, revive the market and trim the losses,” said a top official of state-run life insurer Life Insurance Corporation.

Jaswant, who was the architect of the NDA’s India Shining campaign that lay in tatters after a surprising electoral rout, was diffident about his role in dealing with the crisis. “I have no moral authority to take any decision, I am only responsible in name,” he said. Yet, he instructed regulators to be vigilant and ensure that the market was stable.

Trading on the bourses was halted twice to stop panic selling sparked by worries that economic reforms, particularly privatisation, would suffer under a Congress-led government that is relying on support from Left parties to cobble a majority in Parliament.

Jaswant said he told Manmohan that “he shares his concerns about the health of the capital market”.

“It would nevertheless be of considerable help if the government that is attempting to come into being and its dutiful partners are careful into what they are saying,” Jaswant told the Congress leader.

The Congress-led government, expected to be sworn in on Wednesday, said it was committed to economic reforms and strong growth in its bid to reassure investors.

“Our fiscal and other policies would seek to create a favourable climate for enterprise,” Manmohan said.

“We are not pursuing privatisation as an ideology, but we are not against privatisation where it is called for in the national interest,” Manmohan told reporters. “Therefore, our policy will be case by case and in the wider national interest without any preconceived ideological bias.”

Manmohan, however, cautioned the new government would not hesitate to take action against those who seek to manipulate and create unnecessary panic.

Ashok Lahiri, the country’s chief economic adviser, also urged investors not to panic as the fundamentals of the Indian economy, Asia’s third-largest economy, were strong.

“We have a strong balance of payments position, low inflation, valuation in markets is very good, PE ratios are very good now. It is the right time to buy,” Lahiri told reporters.

“There is no reason to panic at all. Those who sold will rue their decision. The integrity of the market has remained intact,” he added.

Analysts, however, expect the bloodbath on the market to continue, with the Sensex possibly losing another five to eight per cent until the common minimum programme is unveiled.

“The market would stay volatile and if the programme’s policies go down badly with investors, there will be another meltdown,” said a strategist with a top securities firm.

As matters stand, the Sensex is 25 per cent off its January peak of 6200. This means Indian stocks are in a bear market, defined by most analysts as a market where a cartel is heavily into selling stocks.

“It will be the policy agenda that would set the future direction which must clearly spell out the government’s stand on economic reforms, including privatisation,” said the analyst, who asked not to be quoted.