HEADLINE VS CORE INFLATION

 

In day to day news papers we have the news regarding inflation .If we dig deeper ,we need to understand the Headline inflation and core inflation.

So, in day to day news,what we hear is Headline Inflation, while RBI focuses on Core inflation to device policies.

Headline Inflation:

• Headline inflation is a measure of the total inflation within an economy.
• This inflation  including commodities such as food and energy prices. 
• Headline inflation is the raw inflation figure. 
• It can be either Wholesale price index (WPI) or Consumer Price Index.

CORE INFLATION / UNDERLYING INFLATION:

• It is a measure of inflation which excludes items having volatility in price movement, notably food and fuel.
•  Core Inflation is nothing but Headline Inflation minus food and fuel inflation.

Understand dynamics of Core Inflation:

• Food and fuel prices are subjected to fluctuations very frequently, even this frequency may be on a daily basis. 
• Prices of other commodities, do not fluctuate as regularly as food and fuel 
• Increase in the prices of other commodity except food and fuel are relatively much more of a permanent nature.

Because of the abovementioned reason:

• It is clear that if central bank targets Headline inflation then that policy will not be appropriate to check the inflation as headline inflation also takes into account changes in the price of food and energy which is of volatile nature .
• Since food and energy prices are highly volatile, headline inflation may not give an accurate picture of how an economy is behaving. Responding to headline inflation might therefore sometimes be inappropriate as it is subjected to frequent variability.
• In Indian context, demand is not the only factor that causes inflation, there are supply side factors as well. 
• Food and fuel prices are caused by temporary supply shocks and international factors that affect the prices of food and fuel. These factors are out of control of RBI as these factors are out of bound for RBI and are considered temporary and volatile in nature.

Logically Central Banks need to target only core inflation, as it reflects the demand side pressure in the economy. In practice too, the Reserve Bank of India (RBI) and Central Banks around the World always keep an eye on the core inflation. Whenever core inflation rises, Central Banks increase their key policy rates to suck excess liquidity from the market and vice versa.

Conclusively, core inflation acts as an index that can serve you better in gauging the effect of monetary policy on inflation rates by removing the components that are volatile in nature and are more prone to price rises due to supply side shocks.

Inflation: Type and stages

 

TYPES OF INFLATION:

Creeping Inflation: 

• When the rise in prices is very slow (less than 3% per annum) like that of a snail or creeper, it is called creeping inflation. 
• Such an increase in prices is regarded safe and essential for economic growth.

Walking or Trotting Inflation: 

• When prices rise moderately and the annual inflation rate is a single digit (3% - 10%), it is called walking or trotting inflation. 
• Inflation at this rate is a warning signal for the government to control it before it turns into running inflation.

Running Inflation: 

• When prices rise rapidly like the running of a horse at a rate of speed of 10% - 20% per annum.
• Its control requires strong monetary and fiscal measures, otherwise it leads to hyperinflation.

Galloping or Hyperinflation: 

• When prices rises between 20% to 100% per annum or even more, it is called galloping or hyperinflation. 
• Such a situation brings a total collapse of the monetary system because of the continuous fall in the purchasing power of money.
• One of the most famous examples of hyperinflation occurred in Germany between January 1922 and November 1923. 
• During that period, the average price level increased by a factor of 20 billion, doubling every 28 hours.

Case of Zimbabwe:

• Hyperinflation issue started in late 1990's. In early 90's, President Mugabe started a series of land reforms in the form of Redistribution of land, taking land from ethnically European farmers and giving it to ethnic Zimbabweans.
• This transfer of land damaged the country's capacity of food production resulting in dropping of supply far below demand and raising prices of the food.
• During the height of inflation from 2008 to 2009, it was difficult to measure Zimbabwe's hyperinflation because the government of Zimbabwe stopped filing official inflation statistics.
• Peak month of inflation was estimated at 79.6 billion percent in mid-November 2008, inflation doubling every 24 hrs.  
• In mid-2015, Zimbabwe adopted Dollarisation of the economy.

SKEWFLATION:

• When Inflation is there in one sector and prices are stable in other sectors.
• Ex. Inflation in Indian scenario many times is skewflation as inflation is centered around food inflation in India .

Transitory inflation: 

• Increase in the inflation rate is a temporary or short-lived phenomenon and the inflation rate are expected to drop back again. 
• The situation can be on account of any economic event like sudden slowdown in the supply or increase in demand of any item in the economy.

STRUCTURAL /BOTTLENECK INFLATION: 

• Inflation is because of structural problems in the economy.
• It is prevalent in most of developing countries.
• It is on account of weak institutions and imperfect working of market like food inflation in India.

Shrinkflation : (SHRINK+INFLATION )

• Practice of reducing product’s size without any change in its sticker price.
• This strategy is  employed by companies, mainly in the food and beverage industries, to  maintain their  profit margins in a clandestine manner. 
• It appears to be hidden inflation. 
• Post Covid, this s the most prevalent phenomenon.
• Ex . The strategy of Parle -G is the best example to understand this phenomenon.

Greedflation:(GREED +INFLATION)

• Corporate greed fuels this type of inflation. 
• Profit-Price spiral drives inflation instead of the traditional wage-price spiral. 
• The companies exploits the situation of increasing inflation faced by the people in the economy.
•  Companies increased their prices even more than their increased input costs. 
• In developed countries like Europe and the US, there is a growing consensus that greedflation is a significant factor contributing to inflation.

STAGFLATION:(STAGNATION +INFLATION)

• The situation is marked by stagnation and inflationary situation.
• Stagnant economy is marked by slow growth in the economy, decline in GDP and high unemployment rates.
• Example :This happened in the United States during the 1970s when world oil prices rose dramatically, increasing the costs of goods and contributing to a increase in unemployment. Europe faces stagflation during 2008 recession. India faces stagflation during 1990’s.

REFLATION:

• It is recovery phase of the economy coming out of recession.
• Inflation starts increasing but still remains in the negative regime. 
• This phase is characterized by stimulating the economy in the form of reducing taxation rates or by giving huge stimulus to the economy.
• This stimulus leads to the economic expansion. 

DISINFLATION: (DIS+INFLATION)

• Disinflation is slowdown in the rate of increase of inflation.
• Inflation is still there but there is slowdown in the rate of change of inflation.
• Ex. If inflationary rate is 5% then,2% will be disinflationary.

DEFLATION: (DE+INFLATION) 

• Deflation is general decline in the prices.
• Inflation is in negative regime.
• Ex. if inflation rate is -2%, then it is deflation. 
• During Great depression, it was double digit deflation.

IS INFLATION THE NECESSARY EVIL ?

 

Understanding the "Inflation":

सखी, सैयाँ, तो खूबई कमात हैं
मँहगाई डायन खाए जात है

These are very popular lines from the song of a Hindi movie #Peepli live which depicts the negative influence of inflation on the pockets of a common man. It is an established hard fact  that high inflation affects the common man badly .

On the other side ,we need to understand whether inflation is always  bad or its a necessary evil,which is pre requisite for the growth of the economy. If it is so then what should be the range of this required inflation .

INFLATION IS NECESSARY FOR GROWTH :

• Inflation is the sustained rise in the general level of prices for goods and services .
• This increase in the prices  is on account of increase in the demand of goods and services.
• It means that increase in demand results in inflation across the Economy .
• This demand in the economy is responsible for creating demand for the factories and industries which make these industries running fueling the economy growth.

This virtuous cycle clearly proved that inflation is necessary for creating growth in the economy.

INFLATION GROWTH TRADE OFF-

• It is established that inflation within the range is beneficial for growth .
• Central banks all over the world (India included) posit that there is a potential trade-off between growth and inflation in the sense that inflation at low levels promotes growth.
• However, at higher levels/beyond a threshold level, inflation can be inimical to growth which is defined in the context of overheating of the economy.

 Overheating of the Economy:

• When there is high growth in the economy then there is increase in aggregate demand .
• Existing Productive capacity is unable to keep pace with increase in aggregate demand .
• Prodcuctive capacity has exhausted its capacities as the economy is in the situation of the full employment.
• This situation in the economy when existing productive capacity is not fulfilling the  aggregate demand is said to be Overheating of the Economy.
• In this situation,if This demand continues to increase then it will keep  prices in the economy to increase which further increases inflation.
• In this complex situation, Central bank/RBI intervenes in the form of Contractionary Monetary policies (https://economydecodified.blogspot.com/search/label/Conventional%20Monetary%20policy) that increases Interest rates which slows down the consumption of goods and services  and eventually  reducing the prices.
• Such intervention also hampers the flow of money to the financial sector which eventually effects the growth.
• Hence sacrifice of output /Growth is inevitable in the pursuit of inflation reduction. 
• This loss of output to contain inflation is referred to as the sacrifice ratio. 

 Now question arises what should be the optimum range of inflation to fuel the growth in the economy. In the Indian context, Inflation targeting defines this optimum range of inflation. 

Inflation Targeting :

Based upon the recommendations of Urjit Patel Committee, In Feb 2015, Monetary policy framework agreement was signed between the Reserve Bank of India (RBI) and GOI. This was followed up with the amendment to the RBI Act, 1934 in May 2016 to provide a statutory basis for the implementation of the Flexible Inflation Targeting (FIT) framework.

Flexible Inflation Targeting:

• The framework provided for the implementation of the flexible inflation targeting framework and then onwards primary objective of RBI is price stability while keeping growth in mind.
• The Monetary Policy Committee (MPC) was set up and is  entrusted with the task of fixing the policy rate (repo rate) required to contain inflation (Inflation targeting) within the specified target level. 
• The amended RBI Act  provides for the inflation target to be set by the Government of India, in consultation with the Reserve Bank, once in every five years.
•  Accordingly, the Central Government has set 4 per cent Consumer Price Index (CPI) inflation as the target for the period from August 5, 2016 to March 31, 2021 with the upper tolerance limit of 6 per cent and the lower tolerance limit of 2 per cent. 
• Inflation Targets have  been  retained for the coming 5 years ie from April 1, 2021, to March 31, 2026 .

Conclusively, we can say that Inflation is a necessary evil if it remains within the defined range as defined in Inflation targeting in case of India.

Inflation, demand pull Inflation , Cost Push Inflation ,Wage spiral inflation ,monetarist view of inflation

 

Inflation:

• Inflation is sustained rise in the general level of prices for goods and services.
• Inflation means that the purchasing power of currency is falling.
• In India, it is calculated as an annual percentage increase in comparison to the previous year. 

REASONS FOR INFLATION:

As per Keynesian school, Inflation can be of following types :

1. Cost Push Inflation 
2. Demand-pull inflation
3. Built In Inflation /Wage-Price  Spiral

Cost Push Inflation:

• General increases in the cost of the factors of production result in increase in production cost. 
• This increase in the cost is ultimately passed on to the consumers resulting in the Cost Push Inflation.
• Ex. The sharp rise in the price of imported oil during the 1970s provides a typical example of cost-push inflation. Now a days, rising energy prices caused the cost of producing and transporting goods to rise.

Demand-pull inflation:

• It results from an excess of aggregate demand relative to aggregate supply. 
• When aggregate demand exceeds aggregate supply, prices will increase economy wide as supply can not fulfill the aggregate demand in the economy.
• Example: The sharp rise in the prices of hand sanitisers ,masks and certain type of medicine during the  covid.

Understanding cost push vs demand pull :

If your favorite chaiwala  raising prices due to the climbing cost of sugar and milk, you’re a victim of cost-push inflation.

                                                                                But 

If you’re going to buy that tea even though the price is uncomfortably high, you’re creating demand-pull inflation.

Built In Inflation /Wage-Price Spiral: 

In case of demand-pull inflation and cost-push inflation, employees may demand more costs/wages to sustain their living cost. If employers don’t keep their wages competitive, they could end up with a labor shortage. Their increased wages result in higher cost of goods and services as employer has to factor in increased wages in the prices of goods . This increase in price of goods because of rise in wages is built-in inflation/wage-price spiral inflation.

MONETARIST VIEW OF INFLATION:

"Inflation is always and everywhere a monetary phenomenon.”------Friedman

• Monetarists explained inflation as a consequence of an expanding money supply. 
• In view of the Monetarists, the inflation has little to do with the factors like labor, materials costs, or consumer demand. Rather, it is all about the supply of money.
• Monetarists theory is based upon quantity theory of money, which states that:

Money supply and inflation is governed by the relationship M x V = Px T. where,

 M = the money supply,

V = the velocity of money 

 P = average price level, and

T = Output in the economy or the volume of transactions occurring in the economy.

Monetarists believe that in the short-term:

• V ie velocity of money (money changing hands) is fixed as the rate at which money circulates is determined by institutional factors, e.g. how often workers are paid does not change very much. 
• Output T is also assumed to be fixed as it does not changes in short term.
• So, an increase (or decrease) in the supply of money will cause a corresponding increase (or decrease) in the average price level. 

So inflation proceeds at the same rate at which the money supply expands. 

From another perspective, when the money supply increases it creates more demand for goods but the supply of goods cannot be increased due to the full exploitation of resources. This mismatch of demand and supply leads to rise in prices. 

OFFSHORE BONDS, ONSHORE BONDS,Foreign Currency Convertible Bonds (FCCB), Foreign Currency Exchangeable Bond (FCEB),Rupee denominated debt,Masala Bond

ONSHORE BONDS : 

• Onshore bonds are issued by financial entities to raise money from the investors  located within the borrower 's home country.
• It is typically in local currency .

OFFSHORE BONDS:

• Offshore bonds are issued by financial entities to raise money from the investors located outside the borrower 's home country.
• Offshore debt can be Rupee denominated or in terms of foreign currency.

Foreign Currency Convertible Bonds (FCCB):

• FCCB are offshore bonds denominated in foreign currency .
• The issuer can convert the bond into stock at a pre-determined conversion rate .
• The debt of company is reduced on conversion of debt into stock.

Foreign Currency Exchangeable Bond (FCEB) :

• FCCB are offshore bonds denominated in foreign currency .
• The issuer can convert the bond into stock at a pre-determined conversion rate .
• The key feature of these bonds is that they are issued by an Issuing Company, but these equity  are exchangeable into equity shares of another company which is called the Offered Company. 
• The Issuing Company and the Offered Company of an FCEB need to be a part of the same promoter group. 

Rupee denominated debt:

• External debt of India  that is denominated in India’s domestic currency, the Rupee. 
• The contractual liability is settled in foreign currency.
• These bonds are beneficial for the borrower in the sense that exchange rate variation risk is  borne by the creditor and not by the borrower. 
• So, the borrower always pays back the foreign currency equivalent of the rupee denomination valued at the spot exchange rate prevailing at that point in time. 

At the time of borrowing :

Creditor (Dollar)-------------------converted to INR------------------- Borrower 

At the Time of giving back :

Borrower (INR)-------------------converted to Dollar------------------- Creditor

In India rupee denominated debt comprises : 

• Rupee denominated NRE account
• Non-Resident Ordinary Rupee (NRO) account,
• Foreign Institutional Investors (FII) investment in Government Treasury-Bills
• Dated and FII investment in corporate debt securities .
• Masala bond 

Masala Bond:

Masala bonds, are first Rupee denominated off-shore bonds, used by Indian entities to  borrowings from overseas markets .

Features :

• These bonds are issued to foreign investors in rupee denominations and settled in US dollars
• Those foreign investors who want to take exposure of the Indian market invest in these bonds. 
• Being Rupee denominated, the currency risk lies with the investor and not the issuer, unlike money  raised in foreign currency loans.    
• It benefits the Indian borrower from currency fluctuation as there is no risk of loss due to rupee depreciation as the issuance of these bonds is in Indian currency rather than foreign currency.

Private External Borrowings, NON Sovereign Debt, External Commercial borrowings, Trade credit

 FDI:  FDI is investment and without any liability while debt is creating liability of paying it back.

                                                                           vs

External Debt : Gross external debt includes debt incurred by both the Government and the private sector(s) of the economy. 

External borrowings can be Sovereign as well as Non sovereign borrowings. Apart from typical borrowings, Valuation loss due to the change in exchange rate of the US dollar vis-à-vis Indian rupee and major currencies such as Euro, SDR and Pound Sterling is also taken into account. Further external debt can be either :

National /Sovereign External Debt : Debt taken by the governments. 

Non sovereign debt: Debt taken by the private companies. It can be in the form of :

• External Commercial borrowings (ECB)
• NRIs deposits,
• short-term trade credit

NON Sovereign Debt :

Firms can access foreign borrowing primarily through two routes: Trade Credit and ECB.

External Commercial borrowings (CBs): 

• Borrowing of funds by Indian companies from foreign sources in the form of loans, bonds, or other financial instruments .
• Maturity period for ECB is  greater than three years. 
• ECB can be used to finance the business related activities like  expansion of business, the acquisition of assets, and the repayment of existing debt.
• ECB can be obtained from foreign banks, international financial institutions, and foreign subsidiaries of Indian companies. 
• ECB can be in the form of rupee-denominated loans or foreign currency-denominated loans.
• ECB is regulated by the Reserve Bank of India (RBI), which sets borrowing limits .
• ECB facilitates access to a wider pool of capital, diversification of funding sources, and potentially lower cost of borrowing, access of technology with loans .
• As a downside of ECB, it exposes companies to exchange rate risk, as fluctuations in the value of the Indian rupee against foreign currencies can affect the cost of repaying the loan.

ECB’s can be either through approval or automatic route:

Automatic route: If a company passes all the prescribed norms specified by the government, it can raise money without any prior approval. 

Approval route: For specific sectors, the borrowers have to take the permission of the government before borrowing through ECB.

Trade credit: 

• Credit provided by supplier /any financial institution to the importer for a period of 30,60 or 90 days .
• As per this agreement  between both parties, importer/buyer make purchases without payment of any upfront cash.
• The buyer makes payment at a later date but not after the agreed one.

 

Ways and means advances, Normal WMA, Special WMA and Overdraft facility

 

                      

How the central government meets the temporary cash needs:

The temporary cash-flow mismatches of the Government is  managed through:

●        Getting temporary loans from the RBI called Ways and Means Advances (WMA) .

Ways and means advances (WMA):

• Special arrangement in which RBI made temporary advances to the centre and state governments to manage any mismatch in their receipts and payment. 
• WMA is a non-tradable loan paper and it cant be used to fund fiscal deficit. 
• WMA is not part of the the targets mentioned in Fiscal Responsibility and Budget Management Act (FRBM) .
• Loans under WMA are to be returned back within 90 days.
• States and centre both pay interest linked to the repo rate on WMA withdrawals.
• If the WMA exceeds 90 days,there is provision of Overdraft facility .
• In case of overdraft,the interest rate will be charged 2 percentage points more than the repo rate.

WMA for states :

In case of states ,WMAs can be of two types - normal and special. 

Normal WMAs :

• Advances by RBI are without any collateral (G-Sec).
• In normal WMA, the rates are linked to Repo Rate
• The limits for Ways and Means Advances are decided by the government and RBI mutually and revised periodically. 

Special WMAs:

• Special WMA are secured advances provided by RBI to the state against the G-Sec held by the state.
• The operative limit for special WMA for a State is subject to its holdings of Central Government dated securities subjected to a maximum of the limit sanctioned.
• The interest rate for SDF is one percentage point less than the repo rate.
• After the state has exhausted the limit of SDF, it gets normal WMA.  

Overdraft facility:

• When state exceeds its SDF and WMA limits, there is provision of the Overdraft facility.
• The withdrawal above the WMA limit is considered an overdraft. 
• The interest rate for overdraft is repo plus 2% given that it comes under the WMA limit.

In case of gradation of interest rates:

overdraft facility >Normal WMA >Special WMA

IS SENSEX THE BAROMETER OF INDIAN ECONOMY?

 

                                                Snippets from the recent news stories ............

From Haridas Mundhra in 1958 to Harshad Mehta in 1992 and recent report of SEBI are testimony to the fact that common -man /retail investor  is being coned by market manipulators  time and again.

Many a times people argue that SENSEX as barometer of the economy. Is it really so or otherwise. Lets try to understand. 

Stock exchange:

 Platform  where you can  buy and sell stocks. Primarily BSE and NSE are the two exchanges in India . BSE is Bombay stock exchange which is located in Mumbai and one of the oldest exchanges where stocks are bought and sold. NSE  is national stock exchange similar to BSE where stocks are bought and sold as well.

NATIONAL STOCK EXCHANGE OF INDIA: 

The National Stock Exchange of India, located in Mumbai , was promoted by leading financial institutions at the behest of the Government of India, and was incorporated in November 1992 as a tax-paying company.

BOMBAY STOCK EXCHANGE:

BSE Limited is the oldest stock exchange in Asia with a rich heritage. Popularly known as "BSE", was established in 1875. It was the first stock exchange in the country to obtain permanent recognition in 1956 from the Government of India under the Securities Contracts (Regulation) Act, 1956.

Sensex:

It is the benchmark  index of the Bombay Stock Exchange (BSE). As on October 2024, BSE has more than 5500 companies listed under it. SENSEX is composed of 30 of the largest and most actively-traded stocks on the BSE. These stocks are selected based on various factors like:

• Market capitalisation, 
• Trading frequency, 
• Listing history.

T    Sensex is calculated by using the free-float market capitalisation method and through this, the performance of thirty companies gets reflected. The free-float market capitalisation method shows a proportion of stocks that are ready to be traded and are issued by the companies to the public in the market.

 NIFTY :

Nifty is the benchmark index of NSE (National Stock Exchange). Nifty is made up of 50 stocks. As on October 2024, NSE has more than 2300 companies listed under it . The base index value for Sensex is 100, while the base index value of Nifty is 1000.

SENSEX vs NIFTY:

•  Sensex comprises 30 well-established companies, whereas Nifty comprises 50 top companies that are listed for trading on BSE and NSE respectively.
• Any company can be listed on BSE as it has low eligibility criteria where to be listed in NSE a company has to have a very good reputation and huge revenue.  
• Basically NSE is for blue chip stocks and BSE is for all.  
• NSE provides future contract trading where BSE has recently started futures. 
• Trading volumes in NSE is much more than BSE so everyone prefer to trade in NSE rather than BSE.
• Nifty is a broader market index that covers 24 sectors while Sensex covers only 13 sectors.

 IS SENSEX THE BAROMETER OF ECONOMY :

Answer to this question is “YES as well as NO” inclined more towards “NO”.

How Economy affects SENSEX:

• Value of stocks constituting SENSEX /NIFTY depends upon demand and supply of the stocks. 
• Demand of these stocks is directly proportional to the economic health of the country reflected through macro indicators of the nation in general and the financial health of the company. 
• Hence GDP growth, inflation and climate change affect the value of stocks of Indian companies. 

Positive, long-term economic factors affecting Indian Stock market :

• a demographic advantage fueled by urban growth and increasing affluence, 
• Increasing market demand 
• Rural sector still to be explored fully 
• an efficient regulatory framework, 
• a robust government initiative to enhance infrastructure, 
• a manufacturing sector benefiting from supply chain diversification, 
• policies that favor sustainability and industry growth, 
• and an expanding capacity for renewable energy.

But we have to consider following factors before concluding.

1.Going by the definition of SENSEX, it reflects market value of “ 30 well-established companies” which cover around 13 different sectors 

                                                        while 

NIFTY 50 reflects market value of “50 well-established companies” which cover around 24 different sectors.

As per definition, both NIFTY and SENSEX reflects more of the health of these companies constituting the respective index rather than the economy affecting the common man. 

2.It might be a possibility that a company in the indices is performing well moving sensex higher but other companies in that sector might not doing well.

3.More than that ,it is reflecting portion exclusively of formal economy and no cognizance of informal /grey economy which is the most prevalent in Indian economy.

4.SENSEX also behaves according to investment through  FII which again does not reflects the economic behaviour of the Indians, rather health of economies world wide specially of USA .

When USA Economy /Sentiments good :

Indian Capital Market →→→→→→→→Investments/FII/FDI →→→→→→USA

********In  Trump 2.0 regime, US market is buyoed while FII's are consistent on pulling investments from Indian market .

When USA Economy /Sentiments poor:

US Capital Market →→→→→→→→Investments/FII/FDI →→→→→→Indian Capital Market.

*********Quantitative Easing in the wake of 2008 recession led to capital flight of dollar from USA to India giving a push to Indian market.

5.It is also being observed that investments coming from abroad via P-Notes is merely to exploit the market profits and manipulate the markets. On 16^th Oct 2007, when SEBI proposed for curbs on investments via P-Notes ,then there was intra day market crash by 9% within 1 hour of opening session. 

6.Post covid, retail investors have increased in India increasing the exposure of sensex to the common man but recent SEBI reports that :

 “ A study conducted by the SEBI has shown that retail traders tend to be at a disadvantage when it comes to trading in equity derivatives. Approximately 93 percent of these traders experienced an average loss of Rs 2 lakh (per trader) over the past three financial years that concluded in March 2023.”

 7. Collusion between different players in the Economy has also resulted in various market related scams to name a few Haridas Mundhra scam popularly known as LIC Scam (first big financial scam of Independent India) and Harshad Mehta scam (scam of 5000 crores in 1992) are few glaring examples.

8.Many a times it appears that market is more of manipulated rather being driven by fundamentals. Recently case of an IPO mentioned below is a case in point :

"The company Resourceful Automobile garnered an overwhelming reaction from investors, achieving a total subscription that was close to 400 times by the end of the day, similar to trends observed in SME IPOs this year. For an IPO valued at Rs 12 crore, the subscription requests amounted to Rs 2,700 crore. Additionally, the firm operates only two Yamaha dealership showrooms and employs eight people."

Conclusively, Sensex and NIFTY are more of indicating the sentiments of the investors rather behaving exclusively as barometer of Indian economy.

Anticipating good year end for SENSEX 2024.......................

ALL's WELL THAT ENDS WELL .