NEW DELHI, Aug 19 (Reuters) - The Indian stock markets have been affected by the U.S. market sentiments in the short term, even though the country’s economy is robust and its growth story is intact, the finance minister said in a statement released after market hours on Friday.
Indian shares fell nearly 2 percent on Friday to log their fourth straight weekly loss, their longest weekly losing streak since the Lehman collapse, as fears that the U.S. economy was heading towards another recession and that some European lenders were facing a short-term funding crunch triggered risk aversion.
The main 30-share BSE index, which is down 21 percent this year, dropped 5 percent on the week, extending its losses to 14 percent in four straight weeks.
“The effect of the market sentiments in the U.S. and Europe has a bearing on our markets as well in the short term....In comparison to Asian markets, our performance has been better,” Pranab Mukherjee said in the statement.
The steep sell-off in the Indian markets triggered by the economic crises in the United States and the euro zone had prompted a review of the global economic situation by top Indian policymakers including Mukherjee, central bank chief Duvvuri Subbarao and C. Rangarajan, a top adviser to the prime minister.
“The present crisis can, however, be expected to encourage increase in the equity exposure by foreign pension funds and other long-term institutional investors. India is well positioned to capture this flow,” the statement added.
Net foreign institutional investor (FII) inflows into local stocks in this calendar year stood at $912.2 million until Thursday.
“India’s economy is robust and its growth story, intact,” the statement added.
The comments come on the eve of a meeting of India’s powerful planning commission, which will be chaired by Prime Minister Manmohan Singh.
The plan panel is expected to target an average annual growth rate of 9 percent for the five-year period starting from April 1, 2012.
Additional reporting by Subhadip Sircar; editing by Malini Menon
Our Standards: The Thomson Reuters Trust Principles.