Indian Stock Market Collapses over Communist Fears

The Wall Street Journal is reporting some shocking economic news:

“India’s stock market recorded its biggest single-day fall ever Monday, prompting regulators to suspend trading as investors panicked about the economic policies of the incoming communist-supported government of Sonia Gandhi. The benchmark index of the Bombay Stock Exchange, the Sensex, opened sharply lower and tumbled further in a 10.9% drop, before trading was suspended for an hour. The National Stock Exchange, the country’s largest, plunged 11.5%.”

If that’s happening in India, you can bet that the American market will drop as a result too, but that’s not what worries me…


What concerns me is whether the problems on the Bombay Stock Exchange are the tip of a new Cold War iceberg, where we all have such fear of communism that we justify any military or economic measures. For those of you that never learned, the United States was in Vietnam for just this reason: a fear of communist dominance in the Far East. That we were handed the problem in Vietnam by the French when they decided to bail, well, that’s another topic entirely.

The Times of India reports: “MUMBAI: The Sensex fell more than 750 points on Monday morning on sustained fears over the future of economic reforms under a Left-backed Congress government, dealers said.” and the Hindustan Times reports: “Brokers said the volatility in the market would continue until the new Government’s policies, especially those on privatisation of state-run companies, are made clear. The market dived on fears that the Congress party, set to form a new Government after ousting the ruling National Democratic Alliance in general elections last week, may slow down privatisation of state-run companies and undo market-friendly policies to appease the leftists, whose support is crucial for a parliamentary majority.”

It’s going to be an interesting week.

4 comments on “Indian Stock Market Collapses over Communist Fears

  1. I hope your worries for India do not turn up RIGHT! In Andhra Pradesh, one of the states in India, new state government already announced free electricity to farmers 🙁 !
    I do not know how this makes sense.
    If central government also does the similar things, anything can happen.

  2. Well i really appreciate towards your analysis on indian economy, but things are right for buying in stocks even if market touches 7600. I expect a 1000 points rally in JAN or in DEC 2005. Forget about Left parties, they just allowed more than 78% FDI in telecom, and many other FDI limits will be raised soon, need not worry.
    I would like to invite you on my portal http://www.bookprofit.com which is solely for indian stock market.

  3. I love studying history. It looks like the “crash” day is the lowest low. Since then, the SENSEX was consolidating for two months. After that, the index soared and reached the peak at the end of 2007. It went up for 3 YEARS after the “crash”!
    So, I think we should remember that history always repeat itself 🙂

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