The Indian Sensex Fall and its Impact – Bombay Stock Exchange BSE

India is the second fastest growing economy as per economists and statisticians the world over. The Bombay stock exchange or BSE, as it is called is the indicator of the economic strength or weakness of the country. India, which had a closed-door market policy till the late eighties, was a very slow growing economy till then. After India opened its doors to the world in the nineties, the economy picked up at a very rapid rate. Foreign investment grew and the Bombay stock exchange, the prime indicator of the nation’s wealth saw a tremendous increase in points. The sensex, which is a weighted average, based on market capitalization of thirty leading scrips, as against the base average figures of 1979; saw a boom in this period. Apart from a few crashes here and there, caused by fluctuations in the international market and also by some fraudulent scams by the local share brokers, the Indian sensex has been on an upswing since then.

The sensex climbed at a rapid rate, touching record heights in 2007 -2008. The average Indian investor who traditionally has been a very conservative investor became more confident and started investing heavily in the stock market. The stock market grew in leaps and bounds and its growth in the last five years itself has been a phenomenal twenty five per cent. All the economists and statisticians of the world started making predictions about India becoming the next economic superpower of Asia or perhaps the world. All this sounded very good to be true and the whole country’s attitude seemed to be a vibrant one. Against this backdrop the unthinkable happened, the stock market Of the United states of America or Wall street stock exchange crashed due to a crisis in the housing finance sector of its leading banks, caused due to delinquency and non-repayment of housing loans. This resulted in a panic in the world market including India. The sensex dropped more than nine thousand points in the Bombay Stock Exchange. The Foreign Investment also came down heavily due to a liquidity crunch in the major companies. The banks stopped lending to the bankers and in effect the market came to a sudden stop. The Indian investor panicked again and started selling like crazy. Major companies started making announcements like job layoffs to minimize their losses.

This holds true for the aviation industry, among which jet airways the leading player in the private sector, suddenly announced job lay offs in the thousands but later withdrew the layoffs to save face and retain goodwill. However the finance ministry and leading economists have assured the investors that there is no need to panic and run and have promised state support to withstand the crisis. The economists have also been optimistic about the issue saying, a major chunk of Indian money is still is in safe investments rather than high risk ones. At the point of writing this, Indian markets seem to be stabilizing slowly and we will have to wait and watch what transpires over the next few days. The general mood in the air seems to be one of optimism.