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The country's share markets are in jitters. The dealers on the stock exchanges are literally shivering. It was a bolt from the blue. The strike knocked the bottom off the stock exchanges. Fears of the markets having been converted into bottomless pits overnight were widespread. Mass hysteria overtook the hard-headed dealers. How did all this happen? They wonder.

Many investors felt that their health was failing. It is said that health is wealth. But, in the business world, the converse is true — wealth is health. Its loss has a direct effect on the heart. Dealers lose heart, they lose self-confidence; all nuances disappear. Where does this end? — And how? A more important question is: How did all this begin? Who or what is responsible for all this — this act of carnage?

Company promoters:
The market had been jittery for the last several days. Nature's law is that anything that goes up must come down. The share prices were going up and up, the sky being the limit, and this limit was not being reached. There were hectic buying transactions. The initial public offers — the issue of new shares by companies — were very impressive. Company promoters were overoptimistic. They thought that their issues would be oversubscribed in no time and the issues with premium loaded on their nominal values would be selling like hot cakes. The Government spokesmen were blowing the bugle and shouting that all the fundamentals were good and that the condition of the economy is hale and healthy. What more do you want to raise the hopes sky-high?

At the same time many sane people were feeling restive. The going appeared to be so good that it could hardly be believed. Foreign institutional investors were bringing dollars. They were entering the market to buy shares before others could do the same. It was also feared that funds were going out of the country clandestinely and coming back in the form of investment money. Sub-prime dealings were threatening to upset the apple - cart. The situation was highly inflammable. Just a lighted match - stick could do the havoc.

And the market was ignited. Share prices began to tumble. In the course of one day sensex (Bombay Stock Exchange's benchmark share index) melted 1408 points. It was a stupendous fall. The shareholders found to their dismay that the market values of their shares had gone down without their notice. Dalal Street assumed a state of gloom. Yes, in modern times, that wealth is health and not the other way about was amply proved. The national stock exchange's nifty (index) had a great fall. The market virus was more deadly than the bird flu virus!

Who was responsible for this carnage? Who else, if not President Bush of the United States of America? The scene is similar to the one that obtained in Greece when Julius Caesar was assassinated. Anthony incited the people to rise against the conspirators. They rushed along the streets in search of them. A poet by name “Cinna” was caught. Cinna was one of the conspirators. Poet Cinna cried, “I am Cinna the poet, I am not, Cinna the conspirator!” The mob was not in a mood to listen to him. They cried, “Tear him for his bad verses!”

“Bad verses”:
What were the “bad verses” of Bush? The shadow of an impending US recession had its deleterious effect on the markets all over the world — not just Dalal Street. The stimulus package failed to calm nerves in the United States. The fear psychosis soon spread to Asian market and fanned out to Europe and Latin America. The effect was instantaneous. Many of indices of the European markets had a steep fall. The bulls having been scared, the bears made bold to come out of the shadow and tear the share certificates to shreds. It was feared that the bear would snatch the reins from the bulls and begin a bear-dance all over Europe. The European markets had a general fall of about 20 per cent.

Friday's situation in the US was said to be responsible for tripping the world markets. Monday was a holiday in the US and the markets were shut on account of Martin Luther King's birthday and hence the world markets were not quite sure how Wall Street would behave on Monday. The uncertainty in the Indian business continued on Tuesday. The trading on the stock exchanges was not encouraging. The selling spree continued unabated. Investors were rendered poorer by Rs. 6.7 lakh crore. All indices including sensex and nifty ended in the red. The intra-day fall (sensex) was as big as 2062 points, the biggest in the annals of the Indian bourses. The IPO (Initial Primary Offer) euphoria had completely disappeared. The brokers found, to their dismay that their margin had been wiped out. An investor sitting on a profit of Rs. one crore in the previous week found that he owed the booker Rs. 10 lakh! The investors were subjected to capital punishment! It was a horrifying situation.

Panic selling:
But the situation indeed was not quite hopeless. It is true that for every nineteen shares that were in the red, only one closed up. But there were others who were trying to fish in the stock market. They could not be said to be fishing in troubled waters. The situation seemed to be bright for them. They were buying shares in the market while others were indulging in panic selling. One man's poison is another's nectar. Not that they were happy that the share markets were in the doldrums. The markets were volatile. Insurers were actually busy buying the shares by picking and choosing them. They had invested close to Rs. 2,000 crores in the melee. Many mutual funds are not just busy for now, but they may soon enter the market.

The situation is rendered more complex and perplexing because of the liquidity crunch. The issue of initial primary offer and sustained selling by foreign institutional investors are responsible for this situation.

As days pass by, hope seems to be dawning once again. The head of the Federal Reserve System of the United States has cut the federal interest rates by 0.75 per cent. This has resulted in discouraging the withdrawal of funds from the Asian markets. The Finance Minister's announcement that our fundamentals are strong and there is no reason for the panic is timely. This has gone a long way to stabilize the market. We have to wait and see.

HSK
Courtesy: Star of Mysore

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