Has the ‘India Story’ changed inside a week?

PRITAM SENGUPTA writes from New Delhi: The freefall of the stock markets—2,000 points down today; 1,500 points yesterday; down nearly 6,000 points from last Monday—has sent the UPA government into a tizzy with the Union finance minister Palaniappan Chidambaram rushing to warn investors not to panic.

“Global cues”, led by a crisis in the defaultment of home mortgages in the United States which could possibly trigger a global recession, currency appreciation, margin calculation, overleveraging, liquidity—every cause known to the dalals of The Street is being dusted off to explain the precipitous plunge. Last time, it was P-notes.

Gautam Chikermane writes in the Indian Express: “Despite its fantastic growth, India has not decoupled from the US economy yet and so, if the Dow does an ‘aaaaah’, the Sensex would end it with a ‘choooo’.”

But will somebody mention the most obvious one: in a market, what goes up must come down.

That said, why does the Union government feel compelled to explain each and every stock market move and urge investors to stay calm? Sixteen years ago, just before the Harshad Mehta scam broke, the then finance minister Manmohan Singh declared that he wasn’t going to lose sleep over the stock markets.

What has changed since?

Two-and-a-half years ago, when the Sensex was at 7,200 levels, the current finance minister declared that there was nothing to worry and that he would be worried only if it crossed 8,000. At twice that figure, why is Chidambaram, just crowned Politician of the Year, so antsy about the markets?

Fear and greed is what drives the stock markets. Why wasn’t the finance minister counselling patience when small investors, succumbing to the media hype, were begging, borrowing and stealing to satiate their greed in stocks running on hope and thin air? Why does he step in only when there is fear, not around the corner but upon us?

Has the “India Story”—8.9 per cent GDP growth this year, 8.5 per cent projected growth next year—changed so rapidly in the space of a week, despite their “sound fundamentals”, that some stocks should lose more than half their market capitalisation; that some investors should lose more than half their notional gains?

Last week, many media houses were almost acting like brokers for Reliance Power, advising investors on how to open demat accounts to invest in the IPO. Will they now have psychological counselling for those who have burnt their hands even before they could taste the pudding?