Weekends Are Nice

“What is funny about

stock markets is every

time one person buys,

another sells. And both

think they are smart.”

—William Feather

The Indian stock market has been on a wild ride over the last few months, perhaps a hangover from its over-indulgence and acute sensitization to all stimuli and impetuses, domestic or global. In recent weeks, share price movement has been erratic, with scrips swinging unpredictably and erratically in a kneejerk reaction to myriad events worldwide. Investor sentiment is being rocked like a mechanized see-saw on steroids, with geopolitical tensions and events triggering the switch and flagging off a roller-coaster ride.

The result? Extreme market crashes one day and unexpected surges the very next. Analysts and traders are scratching their heads, grappling with and trying to tame a new animal that is living on sentiment and belching out all fundamentals.

Let’s look at examples. A senior minister or leader makes a statement, and our unpredictable and hyper-sensitive stock market gets into overdrive. The opposition cackles and criticises the leader, the market crashes. A bomb goes off in the Israel-Hamas standoff, the market crashes.Russia winks at Ukraine; the market blinks. Volodymyr Zelenskyy guffawsat Vladimir Putin’s folly, stocks crash. Joe Biden passes yet another absurd statement, scrips panic. Trump eats an idli, the market crashes.

As stated above, sentiments are playing the market, with fundamentals being ignored. How else do you explain the massive surge in Hyundai Motors’ newly-listed share on the very day that automakers announce disastrous sales? Or oil PSU stocks crashing just after global crude prices become better for their profitability? Or benefiting power firms tanking hours after the government announces policy sops for green energy? Or infrastructure shares zooming to highs after the government announces a breather in their PLI payouts?

It is all very perplexing. And unexplainable.

Analysts also bewildered

Ramesh Pradhanat Indo-Global Securities is clearly disappointed and disenchanted with the uncertainty. “The market has become touchy, sensitive to global and domestic events, be they geopolitical developments or political statements. Theresultant unpredictability is fostering a volatile environment where even the slightest trigger sends stocks into a tailspin.”

“Fundamentals appear to be taking a backseat and market movements are driven by sentiment and reactions, creating an unpredictable scenario for both retail and institutional investors. Stable investment opportunitiesare missing,” says Neha Sharma from Bloomberg.

Certainly, Indian stockshave become a playground for volatility, reacting sharply to statements from political figures, international events and even seemingly-unrelated incidents. Recently, a chest-thumping statement from a senior government minister led to a market crash, only for the Opposition leader to make a rebuttal, which triggered another slide. Such political dynamics are having a dangerous impact and eroding investor confidence.

For instance, the ongoing Israel-Hamas conflict has sent shockwaves through global markets, and Indian stocksare mirroring the decline. Bombs going off inIsrael, distant from India, send the market tumbling over fearsof broader geopolitical escalation. Similarly, bravado by and booming proclamations by Russian officials on Ukraine cause immediate market rejoinders, hammering the volatility nail deeper into the market coffin. Take outgoing US President Joe Biden’sambiguous statement on economic outlook in the Americas; the Indian stock market mirrored other indices and saw a downward spiral.

Financial researcherAnkit Malhotra says: “The market is responding to these events in an exaggerated manner, perhaps because investors are uncertain about the future. Frequent ups and downs reflect a market that is far from being grounded in economic fundamentals.”

Intrinsic values eroded

The phenomenon is hard to comprehend for all those impacted. While it is understandable that companies are reacting differently to macroeconomic events, the scale and randomness of these reactions are unsettling—it suggests that trading is getting driven by a near-suicidal romanticism which is overpowering the intrinsic value of even blue-chip firms.

Vikram Singh, a senior fund manager, shared his thoughts on the growing unpredictability: “We’re witnessing the market behaving almost like a roller-coaster. There’s no clear pattern to how stocks are moving in response to policy changes. It’s as if investors are caught in a game of guessing what’s coming next, rather than relying on financial indicators.”

The common thread running through these developments is the increasing influence of sentiment. In the absence of any clear guidance from the powers-that-be, the market has little choice but to react impulsively to news of all kinds and creed, driven by global fears and domestic uncertainties. Once considered resilient to external shocks, even the Indian market is now susceptible to the emotional swings of its investors.

For bankers and fund managers playing the larger AUM (Assets Under Management) game running into thousands of crores of rupees, predicting trends presents a growing anxiety.Some are still clinging on to their larger-than-life promise that volatility always presents short-term opportunities. However, with long-term market stability itself in question, thestring holding up even that carrot is fraying and wearing thin.

Analyst Shruti Kapoor perhaps sums it up best when she says: “The larger and inherent value of the economy and specific sectors is continuing to play only a secondary role in determining price movements. Until the sentiment stabilizes, we could continue to see erratic swings in prices, quite disconnected from the real economic picture.”

Glum and mum days

As we face today’s volatile market environment, the only way forward is to be patient while we navigate through the turbulence caused by domestic policies, global events and market sentiment. While this may create short-term opportunities for some nimble traders, the underlying uncertainty is making long-term investment decisions extremely challenging. The key to surviving in this unpredictable market is a combination of caution, resilience and strategic decision-making based on long-term growth, rather than any short-term promise.

Therefore, stay mum when forced to play glum.The problem for small investors is immediate, though.In the Sensex’s walk down from the high of 85,000 points, those with exposure have lost Rs 7 lakh crore for every 1,000-point decline. Simple math shows that by the time ‘stability’ arrives at 74,000 points—most bankers feel this will be the turnaround point—investors would have lost Rs 70 lakh crore. That is a number massive enough to give even Big Boy investors the heebie-jeebies.

Other than crashing numbers and grim financial tales, thereis another lesson to be learnt from this analysis; that markets are not just financial ecosystems, they are mirrors of human behaviour. Wars, weather and politics impact markets not due to algorithms or trading bots, but because human events resonate with the very kernel of hope and certainty. Market crashes are rude reminders of how intertwined our destinies are and how collective resilience can be the only antidote to chaos in today’s Global Village. We created this village; we have to learn to make it habitable.

The writer is a veteran journalist and communications specialist. He can be reached on [email protected]. Views expressed are personal