If the world markets are a coupled entity, correction is country- and time-specific. So even as the January-February results season saw earnings per share (EPS) of Sensex companies rise by 8%, the coupled nature of markets have pulled the Sensex down by 25%, taking its PE multiple down by 32% — from a scorching 28.4 to 19.4. The 4.8% fall in the value of the Sensex to 15,357 today (See Page 21) has to be seen in this context.

Days or months is too short a time to ascribe clear reasons for a market fall, but the fact remains that India stands next only to China in this global crash. Between January 11 and today, it has fallen by 25%, next only to China’s 27.6%.

Flashback to November-December 2007, when the global meltdown began, and the India decoupled story stood strong: as emerging markets fell by 10-12% during the period, the Sensex actually rose by 5%.

The reason then ascribed to Sensex as the last index standing was that the Indian economy does not rely on exports and is more dependent on internal factors — strong domestic consumption, growing infrastructure. In the current fall, these facts have all but disappeared.

“Our markets lagged the correction that started in other emerging markets in November,” said Krishnamurthy Vijayan, CEO, JP Morgan AMC. “The second reason is the tight liquidity in the Indian market in the month of March.”

In other words, withdrawals from investments to pay taxes. Thus, between October through December 2007, when most emerging markets were reeling in red, Indian markets held their ground.

... contd.