Almost everyone whose job it is to observe and analyse the market seems addicted to finding a distinct reason for the daily movements of the big market indices. And Friday’s story was absolutely ready-made. On Wednesday, the government changed some rules that govern taking foreign currency out of the country. On Thursday, the market were closed for independence day; everyone listened to some speeches and optionally, listened to speeches about speeches. And on Friday, the Sensex fell by 769 points. What an easy day for headline writers--none of them had to fall back on the content-free ‘Markets fall on selling pressure’. By the way, when the market move big the headline writers always talk about the Sensex even though the Nifty is the broader and deeper index. I guess bigger numbers are just more fun.
However, in an environment where the large cap indices have gyrated around roughly the same level for something like four years, little attention should be paid to whatever happens on a single day or a few days. On any given day, opinions tend to become a sort of a monoculture and there’s only one sort of a participant on the stage. Day-to-day, these numbers are driven purely by people who are focussed on the next day. Anyone who is interested in equity is busily focussed on identifying companies which are going to get through this mess fine. And anyone else should just be happy that despite all the talk, fixed income returns are now heading above 10 per cent. The larger mess will take probably years to get resolved so it’s better to keep attention on the small stuff.