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Decoupling theory again

Our idea of Indian outperformance comes from comparing the S&P500, which is a dollar-denominated index, to the Nifty or Sensex, which are rupee-denominated indices

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BS Opinion | stock markets

Debashis Basu 



Debashis Basu

Buffeted by bad news since late last year, global markets had been falling more less in sync right until mid-June this year. Around June 17, markets around the world made a short-term bottom and rallied fast, right until mid-August. During these two months, the Nifty rose from 15,319 on June 17 to 17,980 on August 18, a rise of 17.7 per cent. At the same time the S&P500, the leading US index, also went up 17.7 per cent. There was no surprise here. Global markets usually move up and down in sync, in response to global macro news. But what happened next was truly stunning and against all conventional assumptions. From 4,305 on August 16, the S&P500 slumped 14.2 per cent to 3,693 by September 23, wiping out almost all the gains of the previous two months. Strikingly, however, the Nifty has dropped from its peak of 17,980 of August 18 by only about 3.6 per cent, over the same period. The Nifty has just performed a stunning feat of a 10.6 per cent outperformance, which has turned an old maxim on its head: “When the US market sneezes, emerging markets catch a cold.”

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First Published: Sun, September 25 2022. 22:08 IST

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