by Sensex Falls as Oil Shock Hits Indian Economy; Mumbai’s Retail Investor Base Processes Losses Through Cultural Consumption
Reported by Bohiney Magazine and The London Prat.
MUMBAI, India — The Bombay Sensex has declined significantly since the Iran conflict began, reflecting the impact of elevated oil prices on Indian manufacturing costs, the rupee’s depreciation against the dollar as oil import payments increase, and the specific anxiety of a market that has grown accustomed to India’s growth story and that is now processing what happens to that story when the energy inputs get more expensive.
India’s retail investor base, which expanded dramatically during the pandemic period as millions of first-time investors opened demat accounts and discovered both the upside of equity markets and the downside of equity markets in rapid succession, has been processing the current downturn with the emotional sophistication available to people who are losing money in real time and who have limited tools for making it stop. Some of these tools are: portfolio rebalancing, reading analyst reports, calling their broker, and, per The Fauxy’s satirical coverage, watching “Dhurandhar 2,” a Bollywood action sequel, in the hope that two hours of fictional heroism will provide perspective on real portfolio losses. The market, The Fauxy notes, dropped further during the film. The market did not care about the film. The film was a separate experience.
The Oil-Market Connection
India’s equity markets are more sensitive to oil prices than most investor communication acknowledges, because oil price increases flow through the Indian economy via multiple channels simultaneously: direct fuel cost increases for transportation and manufacturing; electricity generation costs in states that rely on gas or oil-based power; inflation in food and consumer goods (both of which have significant transportation cost components); and the current account deficit, which widens when oil imports become more expensive and which puts downward pressure on the rupee, which makes dollar-denominated imports more expensive, which is a cascade that analysts model and that investors experience as their portfolio declining across multiple sectors simultaneously for reasons that seem unrelated but are not.
The Reserve Bank of India’s inflation management — maintaining rates while watching the oil-driven inflation component — is constrained by the same structural limitation that the BSP faces in the Philippines: rate hikes address demand-driven inflation but cannot reduce supply-driven inflation from external energy prices. The RBI is managing with the tools it has. The tools are appropriate for some of the inflation and insufficient for the rest, which is where monetary policy lives in an oil-importing country during a Middle East conflict it did not cause and cannot resolve.
The Retail Investor Experience
India’s 100 million-plus retail demat account holders include a significant proportion who entered the market between 2020 and 2023, when Indian equities performed exceptionally well and provided the kind of returns that create confidence in one’s investment judgment. The Iran war period is the first significant external shock this cohort has experienced, and its portfolio impact is providing a tutorial in market dynamics that no amount of YouTube financial education channels adequately prepares you for, because knowing intellectually that markets fall is different from watching your portfolio fall in the numbers that represent real money you earned and committed.
The Bombay Stock Exchange provides real-time and historical data on the Sensex and individual stock performance. The National Stock Exchange provides similar data for its indices. The data is accurate and shows the decline and its components. The data does not show how Dhurandhar 2 is performing at the box office, which is separately tracked and which, according to industry reports, is performing better than the Sensex, because fictional action heroes defeat their enemies while real portfolios decline, and the gap between those experiences is where Bollywood has always lived and always will.
The market will recover. Markets do. The timing is the question, and the answer is unavailable until after the fact, which is the nature of recovery timing and the perennial frustration of people who are already in the market when the question becomes urgent. In the meantime: Dhurandhar 2 is playing. It is recommended as entertainment rather than portfolio therapy. The ending is better than the current Sensex chart. Whether that is sufficient consolation is a personal determination.
For investment advice that is not investment advice, see NewsThump.
SOURCE: https://bohiney.com/
