Finance Minister P Chidambaram said banks will provide liquidity to brokers/traders to meet all margin calls.
He also asked retail investors to stay invested in the market and not panic as the fundamentals were strong and the market will recover soon.
The finance minister also said that today's crash was expected after what happened last week.
The finance ministry, Securities and Exchange Board of India, Reserve Bank of India and Bombay Stock Exchange authorities were virtually on hotline to assess the situation and minimise the damage.
"There was certain nervousness in the market. My message to retail investors is to stay invested. FIIs are here to stay. There is no reason to panic... banks will provide money to those who want to provide margin calls," Chidambaram said.
"The system is in place and whatever has to be done has been done. My information is that brokers operating on proprietary accounts were under margin pressure, so they were selling.
"But Mutual Funds are buying and even FIIs have bought today."
He said the economy was strong and so was the business confidence index.
Reacting on the stock market crash, Minister of Company Affairs Prem Chand Gupta sought to soothe sentiments, saying there was no cause for panic.
"Economic indicators are strong and ups and downs are parts of any system," he said.
He, however, advised retail investors to invest carefully.
CPI (M) leader Abani Roy demanded a probe and urged the government to spell out the reasons for this unprecedented fall.
He went on to add that while the government took credit when the markets went up, it was quick to blame "international pressures" when the markets hit a spiral.
Additional inputs: PTI
