Rational expectations

Evolving conditions would lead to adjustment in markets

Financial markets are correcting in response to changing economic trends and the emergence of mutant Covid-19 strains. The US economy has just received a big stimulus, combined with the ongoing easy monetary policy. A Supreme Court judgment in India could lead to a surge in the declared non-performing assets (NPAs) of banks. There are also fears that a fresh wave of Covid-19 cases will lead to more economic disruption. Taken together, this has triggered a correction across equity markets. The Nifty has dropped 6 per cent from the record highs it registered in mid-February. It is still very richly valued