Last week we saw the domestic equity market detach itself from what the Dow was doing. What is different this time around?
In the last four, five days, globally emerging markets had sold off significantly, whereas the Indian market had actually moved up. Earlier, the other markets were holding up and the Indian market saw some correction. So, we are seeing a strange kind of move. There is less net institutional participation at this stage and it is a lot dependent on what is happening in the derivative market, how traders are positioning and how some of the hedge funds are positioned.
Secondly, there is turmoil in some emerging markets. There has been significant rate hikes in some emerging markets and some currency turmoil. The US dollar index has been moving up and all this is also creating some apprehensions in the minds of people that there could be some dollar shortage in the sense that liquidity could tighten globally going forward despite whatever the US Fed is saying.
