The near-total obsession with the rise and fall of the stock markets in the last few days leaves one wondering whether we have truly begun to believe that the level of Sensex is the index of our performance as a nation. Even more questionable is the assumption that we will, after all of the analysis of the multitude of factors, be able — though not precisely — to provide a list of issues that are affecting the market. And then we can ask for the government and the regulators to do something about it, so all of us can get back to riding a rising Sensex and tell the India Inc story all over again.

It could be a nice approach to begin by accepting the obvious, that the market in the short term is neither amenable to prediction, nor explicable in simple cause-effect frameworks. We can all believe the long-term story for India only if we recognise that the tailwinds from a larger global realignment are real. And they present both a challenge and an opportunity.

Enough has been said about the changes in inflation expectations for the US, and the possible increases in interest rates for periods longer than previously expected. The trigger for the correction in markets across the world has been largely attributed to the unwinding of ‘carry trades’ that involved borrowing in cheaper regimes and investing them in risky assets like emerging markets and commodities. Behind the surging prices of all assets across the world was the liquidity that was unleashed by the large developed markets, the US and Japan chiefly, to enable their economies to get back to their feet.

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