The Indian Stock Market Fiasco: Lessons to learn by Dr. Bobby Srinivasan and Dr. Sudhakar Balachandran

March 15, 2016 | Posted by bobbysrinivasan << back to blog

During the sub-prime crisis the fall out was similar. In fact in 1989, in the October crash the Dow Jones dropped nearly 30% in a single day. During the sub-prime crisis Indian Sensex dropped from 21000 to 8000. So you see the stock market can correct itself heavily either quickly or spread over a period of time.

Student: I am already alarmed by the data that you have given. It makes me wonder as to how the Indian market will go?

Professor: First, we need to focus on who the players are in the market. There are four types of players in the market, namely promoters, the Domestic Institutional Investors and Insurance Companies and Foreign Institutional Investors and finally the Retail Investors. All these different categories of investors participate in the market and the price that you see is the outcome of their interaction.

Student: What is the level of involvement by these groups? Is somebody dominant than the others?

Professor: Precisely. I will give you this information in my next blog. Be patient. Obviously all players should have different perceptions. Some group may think that the stock or the market is going up while the others may have the exactly opposite view. It is their interaction that creates the ultimate price of a stock or the index for any given day.

Student: I am eager to know as to how they interact? Do we have data on that?

Professor: Yes of course. Read the Business Line every day. They give the complete break up of who the buyers and sellers are and the net effect. But I will get to that later.

Student: Professor. I am awaiting the next blog.

Professor: Done.

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