Visiting Fellow Praveen Chakravartywrites in Business Standard: "It's clear that behind the five-fold increase in Sensex and ten-fold increase in market capitalisation in the 21st century is actually the greenback, not the signature of our RBI governor".
"The US Federal Reserve has started to wean the US economy off... "quantitative easing" (QE). Reserve Bank of India (RBI) Governor.. has been apprehensive about its potential impact on emerging economies like India... Over the next few weeks and months, as the tide of US capital flows run out, naked swimmers in emerging economies could be exposed...
... In the 21st century, foreign investors invested $160 billion (in today's dollars) in India's equity markets. In the same period, GDP grew from $430 billion to $1.2 trillion, the BSE Sensex rose from 5,000 to 26,000, market capitalisation of the stock market went from $166 billion to $1.7 trillion while domestic Indian mutual fund investors withdrew (yes, not invested) $6 billion from the equity markets. This seemingly spectacular climb in equity values in the last two decades has been fuelled almost entirely by foreign investors. A simple multivariate regression analysis of quarterly market movements over the last 55 quarters (since Q1 2000) and independent variables reveals that FII flows singularly explain such market moves... It's clear that behind the five-fold increase in Sensex and ten-fold increase in market capitalisation in the 21st century is actually the greenback, not the signature of our RBI governor..."