The media and the stock market collapse

22 January 2008

Indian stock markets plunged by 7.4 per cent on Monday, and closed another 4.97 per cent down on Tuesday. The fall, much more precipitous than other Asian and global markets, left small investors nursing their wounds and mourning their phenomenal losses, much of it notional.

As the stock markets had soared, the Indian media had thrown all balance to the winds, painting the “India Story” as one which would never end. When the fledgling Reliance Power was making its initial public offering last week, television stations were offering advice on how to open demat accounts.

Little wonder first-time investors are blaming the media in an indirect sort of way for not cautioning them enough, for painting so rosy a picture that they thought there was no dark side.

The BBC’s Karishma Vaswani quotes one first-timer:

“I thought this (the stock market) was somewhere I could put my money safely and grow it, rather than putting in the bank like my dad did,” said Gauravi Sharma.

“My parents had never invested in Indian shares, they said it was unsafe. But I thought, after everything I heard on TV and in the news, that this was the right place to put my money. Now I’m not so sure.”

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