The 3 main components to a price of an asset are its intrinsic value, inflation and expected growth potential. Majority of empirical search in finance has focused on measuring and predicting the expected growth potential…..
Post Congress coming back to power without the constraints of Left, Indian stock exchanges seems to have gone crazy. Price fluctuations in asset seems to be dominated more by the emotional and perceptual components in the ‘expected growth potential’ part of the pricing function…atleast in context of WE INDIANS
I am surprised at the role of Indian media in twisting the fundamentals of India economy superficially. Even the leading national dailies’ editorial teams and analysts fail to look deeper into the variables and their inter-linkages….
Fundamentals of an economy do not CHANGE overnight…expectations DO and thats what I feel makes SENSEX…. go crazy