ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Stock Market Fall

What caused the sharp fall in the prices of stocks in the month of May? The most plausible explanation is that, after the prolonged rise in prices, foreign investors judged that the market was overvalued and decided to book profits. They might have been pushed towards doing so by the rise in interest rates in industrial economies and the expectation that the rate rise has not run its course. The troubling aspect though is that India's share of portfolio equity flows has been fuelled substantially by participatory notes. Also, the composition of total equity flows of private capital in India is at variance with that of developing countries.

Managing Volatile Flows

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