Page last updated at 12:13 GMT, Monday, 13 October 2008 13:13 UK

India's Sensex regains confidence

Indian Finance Minister P Chidambaram
Mr Chidambaram's words have calmed down the market

India's benchmark Sensex share index has gained 808 points, closing 7.68% up amid signs of investor panic receding.

Earlier, Finance Minister P Chidambaram said India was working on steps to increase the amount of cash in the financial system.

He said the measures, which would be announced soon, would help boost the confidence of investors.

The announcement, which came just before trading began, helped rally the stock markets.

The Sensex fell by 16% last week and the crash also affected the rupee's value which fell to 49.3 against the US dollar on Friday.

But on Monday the Sensex closed at 11336.

'Watching carefully'

"We are working on more measures that will infuse liquidity, make credit intermediation smoother, and increase the confidence of depositors and investors," Mr Chidambaram told a press conference in the Indian capital, Delhi.

"We hope to be able to announce them shortly," he said.

Rising inflation erodes the value of the Indian currency and investments

Mr Chidambaram said the government, the Reserve Bank if India (RBI) and the stock market regulator were coordinating on how to deal with the volatile market.

"We are watching the situation carefully and we will respond swiftly according to the needs of the situation," he said.

"Our banks are ready and willing to provide credit," he added.

Reaction on the Bombay Stock Exchange to Monday's improvements was mixed.

"We are not out of the woods yet. Next two to three weeks are critical. One will have to see global markets," said, investment consultant Vibhav Kapoor. "Today's gain is more of a technical bounce back."

This year, Indian shares have lost nearly 50% of their value and last week was one of the worst weeks in recent years for Indian investors.

On Friday, RBI announced a cut in the cash reserve ratio for banks to 7.5% to help generate more cash in the banking system.

It said the move would make more than $12bn of credit available to the banks.

Traders said the market was responding to the global markets and the cut in the cash reserve ratio would help reduce the impact of the global crisis.

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