Sensex and CNX Nifty are two of the most followed things in India. A lot of people actually know Sensex is at 20,000 (or 18,000) without knowing what is Sensex, what is the meaning of 20,000. Even there are people who think today Sensex has fallen, so all stocks have fallen today.
For these kinda people, I have one line to say- " Revise cause-effect relationship from your high school English book. Think whether Sensex is the cause or the effect."
Clearly, fall (or rise) in Sensex is the effect of fall (or rise) in prices of its 30 ingredients & not vice-versa.
But then nothing is black & white. Sometimes, Sensex becomes the cause... movement in underlying stock prices becomes the effect. Read This.
Think now... A lot of money follows Index funds... A number of MFs have restrictions to buy & sell only Index stocks. All these will have to sell RComm & RInfra and buy Sun Pharma & CIL.
Artificially high demand for Sun Pharma & CIL and low demand for RComm & RInfra. So Sun & CIL should go up till Aug 8th. While RComm & RInfra could well become bargains by Aug 8th.
PS- This is going to be my first experience of this kinda price behaviour. Reality may be different than my thinking. Lets observe!
For these kinda people, I have one line to say- " Revise cause-effect relationship from your high school English book. Think whether Sensex is the cause or the effect."
Clearly, fall (or rise) in Sensex is the effect of fall (or rise) in prices of its 30 ingredients & not vice-versa.
But then nothing is black & white. Sometimes, Sensex becomes the cause... movement in underlying stock prices becomes the effect. Read This.
Think now... A lot of money follows Index funds... A number of MFs have restrictions to buy & sell only Index stocks. All these will have to sell RComm & RInfra and buy Sun Pharma & CIL.
Artificially high demand for Sun Pharma & CIL and low demand for RComm & RInfra. So Sun & CIL should go up till Aug 8th. While RComm & RInfra could well become bargains by Aug 8th.
PS- This is going to be my first experience of this kinda price behaviour. Reality may be different than my thinking. Lets observe!
