The shine of the financial markets is the only aspect, On which the entire story of India’s economic rise hinges. Otherwise, The real economy of investment-production-distribution does not seem to shine from any angle. Now there are signs of eclipse on the financial markets also.
Foreign portfolio investors (FPIs) withdrew nearly Rs 94,000 crore from Indian markets in October. This is unprecedented. Before this, FPIs had not made such a huge withdrawal in any single month. When the Corona epidemic hit, these investors had withdrawn Rs 61,973 crore in March 2020, which was a record so far. The latest withdrawals resulted in an eight percent decline in the Indian stock market index in October. Obviously, this development has increased the concern of India’s financial managers. After all, the brilliance of the financial markets is the single factor on which the entire story of India’s economic rise hinges. Otherwise, the real economy of investment-production-distribution does not seem to shine from any angle.
On the contrary, now even the Union Finance Ministry has accepted the reality of falling consumption and demand. In October, real economy businessmen and even financial newspapers were forced to say that the middle class in India was shrinking. Whereas the economic prosperity of all the developed countries in the world has depended on the expansion of the middle class. What is now happening in India is that the only shining aspect is also being eclipsed. Experts have given two reasons for this. The first is that Indian shares are overvalued – that is, their natural value has been made higher than it should be.
Secondly, China is taking control of its stock markets by giving incentive packages, due to which foreign investors are finding it more profitable to invest money there. As a result, apart from the stock market, they also withdrew about four and a half thousand crore rupees from the debt market. Now eyes are on whether the trend reverses this month or in the coming months. If this does not happen, it will be almost impossible to maintain the increasing shine in the stock markets, especially after 2020. The loss that small investors are facing in this sequence is different. Overall, India’s economic managers face a difficult challenge.