NEW DELHI: The recent slump in Indian stock markets was a result of global weakness and not because of a tax on long term capital gains that the government had announced in its federal budget last week, the country's finance secretary said on Tuesday.
Indian shares slid more than 3 percent on Tuesday and the rupee weakened as a global market rout whacked sentiment. Some investors have said that the global decline has added to concerns ahead of an Indian central bank meeting this week and a new capital gains tax later in the year.
In an interview, Finance Secretary Hasmukh Adhia said the reaction of the markets to the tax had been limited and could be seen on the day the tax was announced on Feb. 1.
The broader NSE index ended 0.1 percent down on Feb. 1, recovering losses after the news of the tax was announced in the federal budget.
Global stocks have been hit hard by concerns about inflation and interest rates, following a strong job numbers report in the United States on Friday.
Adhia said the Indian markets had been swept along in the global concerns but were fundamentally strong and would recover as those worries eased.
"The current market situation is not because of LTCG. It is because of global slowdown," Adhia said, referring to the long term capital gains tax. "Investors are requested not to panic because of this."