The Indian Economy Blog

September 23, 2005

Markets Move, Ok?

Filed under: Capital markets — Amit Varma @ 2:55 am

That excellent columnist, Ila Patnaik, writes in the Indian Express:

The drama in the stock market has highlighted how India is still an immature market economy. It is the job of the stock market to fluctuate, to move in response to expectations. But in the media and in official circles in India, this induces disproportionate hysteria.

To become a mature market economy, the government has to stop trying to manage prices. When prices fall, as they did on 17 May 2004, we do not need the government to “prop up the market” or to look for manipulators. And when prices rise, we do not need a coordinated assault on the market. The government must respect the process of speculative price discovery, and accept the valuations that come out of it.

Amen. Read the full thing.

10 Comments »

  1. Thanks for the link, Amit. I have posted about this story too.

    Comment by New Economist — September 23, 2005 @ 6:01 am

  2. India need infrastructure 100 year old roads is not the charm of the city!!

    Comment by Rahul — September 23, 2005 @ 4:27 pm

  3. well, free market remains a figment..indian stock market has been fed the same credit bubble fodder, thru FIIs, as few other so called emerging market..The average Ram ought to steer clear of the stock market which may come down as quickly as it has gone up..
    much buzz about offshoring notwithstanding, indian work ethic as well as horrendous red tape is still a huge problem..when the credit squeeze comes along pending housing bubble-bursts worldwide, india would have to start afresh….barring the hoopla aka mirza-effect.

    Comment by sanjay(miami) — September 24, 2005 @ 3:46 pm

  4. Alan Greenspan has in the past year repeatedly comment against the housing bubble in the US. The job of the Federal reserve is to make sure that growth happens on a substained basis – i.e. there is no market crash, and there are are no bubbles that form. If there is a bubble forming somewhere, it has to be contained by the policy makers. Same goes for Indian markets.

    Indian market is extremely less regulated. It is the job of SEBI to make sure there is no manipulation, and if anyone has seen the way markets have moved in the last couple of months, there has been a big element of speculation and manipulation. As SEBI has limited powers vs. the SEC in the US, the finance ministry has to get involved to curb manipulation. Over time, the finance ministry may devolve more power to the RBI and SEBI, but till that time comes, the government has to get involved.

    Comment by Gaurav Jain — September 25, 2005 @ 6:36 pm

  5. Gaurav says “It is the job of SEBI to make sure there is no manipulation, and if anyone has seen the way markets have moved in the last couple of months, there has been a big element of speculation and manipulation. As SEBI has limited powers vs. the SEC in the US, the finance ministry has to get involved to curb manipulation.”

    Gaurav

    1) Can you please define manipulation for us?

    2) How is speculation different from trading?

    Comment by Prashant Kothari — September 25, 2005 @ 11:51 pm

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  9. SxzZx

    Comment by kuttan — September 9, 2006 @ 8:15 pm

  10. Indian job market is less regultaed but it is actually moving towards
    forming a more highly paid market, and stopping the flow of talented personels leaving the country. like computer related fields etc

    Comment by Mohammed — December 8, 2006 @ 9:54 am

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