Not long ago, author Frances Cairncross coined the phrase ‘death of distance’ in the communications world. Economic inter-dependence is doing the same to stock markets when it comes to what influences them.
Erratic hardly begins to describe how India’s stock markets have been behaving lately — plunging because of a credit crisis in the US although fundamentals were strong back home, and rising despite the poor performance of domestic industry and infrastructure sector.
“The market has rallied largely because of the (US) Fed move (to cut interest rate by 0.50 percent),” Enam Securities’ Sachchidanand Shukla said when asked what’s driving the market although things at the domestic front were not so encouraging.
Sensex, the stock market barometer, rose by a whopping 653 points to close above the 16,000-point level on Wednesday.
“The main factor behind the 16K level was the Fed cut, which would ensure more liquidity flow from the US,” S P Tulsian, CEO of Premium Investments said.
“This trend shows that global cues are having a very influential effect on our market, whereas we should be growing on our own strength,” said Arun Kejriwal of Kejriwal Research and Investment Services.
The same market had taken a beating when reports of a crisis in the US housing market surfaced in late July. The Sensex had then tanked over 2,089 points in less than a month.
This is in contrast to what happened in May last year, when Sensex fell 3,872 points in just about a month on jitters caused by a reported government move to treat FIIs as traders.
Domestic developments hardly seem to matter these days, though they do scare investors occasionally – like the talk of Left parties withdrawing support to the UPA government. But this fall was just a blip on the bourses.