The market is going through a roller –coaster like situation. Since past six and a half months, the Sensex has gone up by over 200 points on 31 days and fallen by such margins on 33 days. There were eight days when it jumped over 500 points, but there 11 other days when it fell by this huge margin. This also includes events with nasty dips like the one in January when it fell by over a thousand points and then few days later it soared by over 800 points. The entire above explained situation is taking place because our stock market is now integrated with the global financial architecture’s. The investors and speculators in India are attuned to global economic events like fear of recession, interest rate cuts or mortgage crisis in the US. Above all, a huge amount of very mobile finance is a player in our stock markets.
More than one third of the value of all buy and sell transactions in the Bombay Stock Exchange and the National Stock Exchange are now in the hands of foreign institutional investors (FII’S). Their share in overall turnover has sharply risen to a decisive 35% in 2007. In January 2008, FII’S pulled out over Rs.13,000 crore from the stock markets, leading to a selling frenzy. Their share in turnover was 36%.
I now would like to conclude this article by saying that since most FII’S tend to act together, their activities either selling or buying will naturally start determining which way the market will move.