Never before, probably, has the sensex moved as wildly as it has in the past three months. During this short period, the bellwether index of the Indian stock market has shed more than 30 per cent off its January 10 peak of 21,206.77 (on March 17, it closed at 14,809.50). Besides that drop, which happens to be the second-biggest after Turkey during a phase when global stock markets have been in turmoil, it has been the intra-day yo-yoing of the Sensex that has been most perplexing. On an average, during the past three months, the swings between the day’s highs and lows have been around 3.24 per cent—compared to just 1.8 per cent during 2007.What is the matter with the Indian stock market? Well, the easy part is that since the beginning of the year, foreign institutional investors (FIIs) have been selling more Indian stocks than they have been buying.
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For the moment, even the slightest rise of the Sensex is a cue for investors to square up their positions by selling, thus, giving rise to the volatile see-sawing that the market has been witness to in recent months. Much will depend on factors such as the US economy, the real effects of the subprime crisis on US financial institutions and, of course, oil and other commodity prices before we can expect a semblance of stability on the Indian bourses. Welcome to global integration.