May 18, 2009

 

The non-news of the day

Consider this hypothetical situation. You visit the fruit market early in the morning. The shops are yet to open and trucks are unloading the fruit baskets. There is only one guy with 20 mangoes in his basket is selling those mangoes. You go and ask the price. 3 days back you bought these mangoes for Rs 200 per dozen. Now this seller senses that he is the only guy selling there and asks you to pay Rs 1000 per dozen. And the entire market goes crazy about this one data point and start screaming the prices of mangoes have gone through roof.

Sound silly? Well, not so much when you see this.

Indian stock markets were shut down today. Well, it has happened earlier as well, but the twist this time, rather first time in the history, is that it was going up and it was closed. Nifty up by some 17% before it closed. The anchors on the blue business channel seem all excited about it. The headlines are gushing over how billions of dollars worth of (paper) wealth was created in just one day.

As usual, the truth continues to be boring. Not many were able to convert their paper-wealth to real, sweet-smelling 1000-Rupee notes. Here is why. The markets were open only for few minutes in the entire day. The total trade on Nifty amounted to Rs 170 Crore. The lowest volume in the month of May was Rs 13594 Crore and the highest turnover was Rs 18634 Cr on 6th May 09. So, today's turnover was barely 1% of the usual volume. And remember, these are not exactly euphoric days. Very few people got a chance to either sell or buy.

Now only if tomorrow, we register volumes of Rs 20,000 Cr which sustains this 20% spike.

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