Singing the same tune?
When it comes to stock markets, the Chinese influence on India has been growing consistently. A recent study shows that the intensity and direction of movement between Chinese stock exchanges, including the Shanghai Composite Index and Hang Seng Index (which tracks the performance of mainland China companies), and the Indian equities have been quite similar.
Sample this: On August 17, when the Shanghai Composite Index tumbled 5.8 per cent on fears that money spent on stimulating the economy could cause a bubble in stock and property markets, the BSE Sensex fell 4.1 per cent, or 627 points. Again on August 31, the Shanghai Composite fell 6.7 per cent, dragging the Sensex down by 1.6 per cent.
According to estimates, the correlation between the Shanghai Composite Index and BSE Sensex is 0.9 in 2009. A high correlation would indicate that the BSE 30 should rise when the Shanghai Composite Index moves up and viceversa. What then are the key reasons behind such a strong correlation? Analysts think this is largely because fund managers across the globe talk about India and China in the same wavelength.
“On various occasions, we have seen Indian and Chinese stock markets moving up and down simultaneously. Global funds finding their way into the BRIC nations take similar calls on the key benchmark indices of all the four economies. However, within the BRIC quartet, FII money comes and goes at the same time in these two economies,” says Jyoti Jaipuria, Head (Research), DSP Merrill Lynch.
