Financial Daily from THE HINDU group of publications
Tuesday, Dec 28, 2004
Financial Daily from THE HINDU group of publications Tuesday, Dec 28, 2004 |
|
|
|
|
|
Opinion
-
Letters The bubble
The current stock market boom has the characteristics of a bubble. It is powered by the inflows of `hot money' from foreign institutional investors. No institutional investor stays stuck to a stock beyond the short term. Share market speculation is compounded with currency speculation. The price-earning ratios of blue chips are high. The inflows increase forex reserves, complicate the conduct of monetary policy and aggravate the interest burden of government due to open market operations. With the exception of primary issues, they result only in changes in the ownership of shares. From the South Sea Bubble to the melting of the markets in October 1987 or the subsequent East Asian Crisis the authorities never admitted the unsound nature of the booms when the euphoria was high. One stray remark of a US official was enough to cause tremendous damage, overnight, in 1987. India was not affected then because its markets were not open to the world. A. Seshan Mumbai Letters to the editor and contributions can be sent by e-mail to: bleditor@thehindu.co.in
More Stories on : Letters | Stock Markets
Article E-Mail :: Comment :: Syndication :: Printer Friendly Page
|
Stories in this Section |
|
The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription Group Sites: The Hindu | Business Line | Sportstar | Frontline | The Hindu eBooks | The Hindu Images | Home |
Copyright © 2004, The
Hindu Business Line. Republication or redissemination of the contents of
this screen are expressly prohibited without the written consent of
The Hindu Business Line
|