New Delhi: Saying that the steep fall in Indian stock markets was a contagious effect of plunge in overseas bourses, The Reserve Bank of India on Wednesday said the country should have strong market and regulatory mechanism to avoid disruption in markets.
Indian equity markets on Wednesday plunged by over 600 points in early trade following the steep fall in the Chinese markets on Tuesday.
The Chinese government has appointed a task force to look into stock market practices, which has led to a knee-jerk reaction of its stock market that spread across the world.
"It reminds us of the inter-connectedness of the markets and, however, healthy a country's fiscal or macro situation is, given the open current account and more open capital account, any action anywhere in the world will have an effect," as quoted by PTI, RBI Deputy Governor Rakesh Mohan said in Mumbai.
Asked if the event will slowdown the government and RBI's plans to achieve full capital account convertibility, Mohan said, "We have to be much more conscious of these possibilities and continuously think on what could happen.
"We should run our system in a way that our market and regulatory strengths should be such is that our markets don't get disrupted," he added.
It reminds us that we have to constantly keep track of global developments, he said.
"We are not used to having it (economy) open. And as we open-up these things matters more and therefore the government and all regulators have to give much more importance to financial stability," Mohan said.
He also cited similar events in the past when Chinese markets pulled down the Dow Jones index by 400 points, despite the fact that nothing was done by the US.
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