Buoyant
investors strongly believed this year that the recent bull
run was an unprecedented one and hence anticipated that it
would be longlasting. Investors always turn very optimistic
during the bull run assuming that current run is unlike the
previous ones which ended up tragically in crashes. Nevertheless,
these optimists were once again proven wrong. The stock markets
seem to follow the principles of gravity: everything that
goes up must come down. Of late, the Indian stock markets
have been experiencing some of the biggest crashes in a very
short span of time.
The
Indian stock market barometer, Sensex, has shed off more than
2,100 points in just eight trading sessions from May 1122
while it took 10 months to gain 5,000 points. From the record
high of 12,651 on May 11, the sensex has steeply declined
to 10,481 points by May 22. This implies it has lost around
17% of the value of sensex in a very short span. But the market
carnage has not ended here, instead it has continued with
its roller coaster ride, panicking even the bravest of the
investors. On June 14, the sensex closed at 9,005 points which
is lower than the sixmonth low figure (9,242). Though many
s have expected a reasonable degree of correction in
the benchmark index, very few would have guessed this severe
savage.
The
Indian stock market has witnessed the longestever bull run
in the past three years, and has been positioned as one of
the best performing stock markets among the emerging markets.
The sensex took a long breather after the dotcom bust in 2000
and resumed its northward journey in May 2003 when the benchmark
index resurged to the 3000mark. It crossed the 4,000mark
in August 2003, the 5000mark in November 2003 and the 6000mark
in January 2004. However, after taking a long breather, it
pierced the 7000mark in June 2005. The rise of sensex from
this point has been regarded as purely liquiditydriven with
large inflows from FIIs. Mutual funds and other institutional
investors also got into stock markets. From then it took hardly
a year for the sensex to breach the magical 12,000mark.
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