The Telegraph
Since 1st March, 1999
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22 minutes of madness

May 17: A Congress government — leading a coalition this time — is taking charge with Manmohan Singh possibly as finance minister with a crisis hanging over its head in an eerie rerun of 1991.

In the worst 22 minutes in the history of the Indian stock market, shareholders lost Rs 1,24,005 crore as Black Monday saw the biggest-ever intra-day crash.

“There is blood in the market and some people have clearly played dirty,” said a broker.

In the first 17 minutes of trading, the Bombay Stock Exchange sensitive index, the barometer of market mood, lost 550 points, forcing the authorities to close shop to allow sentiments to cool.

After it opened more than an hour later, in five minutes another 230 points were wiped off the sensex, recording the biggest decline ever of 780 points, triggering a second shutdown.

With a power vacuum in Delhi, as the Congress-led government had yet to take over and a lameduck administration was in place, it appeared as though stock prices were slithering into a bottomless pit.

Outside the BSE on Dalal Street, an angry crowd had gathered, shouting “Sonia Gandhi hai hai”. “This is the worst day in our lives — we’ve lost everything, we’re dead,” said Sandeep Sirsalewalla, a broker.

“We want the BJP back.”

The mood was turning against the victorious Congress-led alliance amid near unanimity that statements from Left leaders had caused the panic, with foreign institutional investors fearing a brake on divestment of public sector shares and reforms.

Manmohan Singh, tipped to be the finance minister in the new government and a veteran of 1991’s foreign exchange crisis as well as the securities scam-sparked market meltdown a year later, rushed to Jaswant Singh, who is holding charge as caretaker.

The finance ministry swung into action following the meeting. Jaswant Singh said: “I have no moral authority to take any decision, I am only responsible in name.” But he instructed the market regulator, Sebi, and the Reserve Bank of India to be vigilant.

Manmohan Singh promised Jaswant Singh that they would “work together” and said “we will support any action taken by the outgoing NDA government” to restore order.

Government sources said the finance ministry asked domestic financial institutions to intervene.

“Around noon, we did receive instructions from the finance ministry to step up our buying,” said a Life Insurance Corporation official.

As it reopened after the second cooling-off period, the sensex recovered some of the loss, helped obviously by the intervention, but still ended 564 points lower from the previous close, the second highest fall after the 570-point drop during the securities scam.

Manmohan Singh went public with comments aimed at calming frazzled nerves. He appealed to allies to “exercise restraint” while making statements — in a reference to Left leaders’ proclamations suggesting shutting down the disinvestment ministry, which the market seemed to have latched on to as it went into panic beginning last Friday.

“The new government will not hesitate to take action against those who seek to manipulate the markets and create unnecessary panic,” Manmohan Singh said.

“We will persist with the reform package, a reform which strengthens the climate for enterprises and is seen to be addressing the problems of agricultural stagnation,” he said.

“We’d like to work towards a policy which sustains the growth rate of our economy at 7 plus per cent, agriculture growth of 4 plus per cent, industrial growth of 10-12 per cent.”

Analysts, however, expect the bloodbath to continue, with the sensex possibly losing another 5 to 8 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.

The programme is not expected in another three to four days.

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