Stock market, rupee fall due to fears over QE: FinMin

Completely stifling liquidity to affect growth, says officials from ministry

As there is blood bath in the stock and forex markets, officials in the Finance Ministry attributed the heavy selling in equity markets and tumbling of the rupee to the fear that the US will start withdrawing from quantitative easing early and clearly stated that arresting the rupee fall through choking liquidity would harm growth.

The officials allayed speculations in the market that margin money for short selling of shares will be raised.

Key officials said people in the market fear that this may be the beginning of the end of US bond buyback plan. "Withdrawal of QE may start early, that is the fear," a key official said, adding the worries over the rupee value are spreading into equity markets and vice versa.

The officials said theoretically it is possible to arrest the rupee fall by completely choking liquidity but that will have severe impact .on growth. "But, that is not the mandate and intention of government."

They also tried to convince the market that margin money requirements for short selling of shares will not be raised. "There is no proposal to this effect," one of  the officials said.

The Sensex plunged by 552.96 points or 2.86% at 18,814.63 points as per the latest reading on the Bombay Stock Exchange. The rupee touched the record 62 against the dollar in mid-trading today.