Posts Tagged ‘BSE market cap’

Greed and Fear : Factors that Drive the Stock Market !

fear and greed are the two key factors that drive the stock market :)

Everyone knows that fear and greed are the two key factors that drive the stock market.

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If you talk to any seasoned investors in the market, they would tell you of the stories of how people got carried away by greed and lost all their money in the process.

Stories about people spooked by ‘fear factor’ also do the rounds of Dalal Street at regular intervals.

According to a study by SMC Capitals, “the elements of fear and greed are clearly apparent in the trends of allocation of assets by the investors in terms of cash and stocks.’’

The trend, says the study, can be seen at the levels of market cap and bank deposits in the economy.

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When there is fear among the investing community, the bank deposits go up.

And, when there is widespread optimism, the market cap levels go up.

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“If you look at investor behavior in the last three years,
the pattern is very clear:

the first year was of over-optimism,

the second was of over-pessimism and

now it’s the recovery period.

This trend is clearly visible if you look at the market cap and bank deposits (or the real wealth),’’ says Jagannadham Thunuguntla, equity head of New Delhi-based SMC Capitals.

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In the study, SMC has compared the BSE market cap from the period starting January 2007, with the aggregate bank deposits in the bank deposits.

The relative measure of the entire market capitalisation of BSE as a percentage of aggregate bank deposits in the entire banking system demonstrates the mindset of the investor community.

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Read the Full Story on The Economic Times

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