Today, in response to fears about the Congress Party's economic policies, the Indian stock market crashed. The Sensex index was down 11% after two trading suspensions. This is in addition to a 6% fall on Friday.
This fall really shouldn't surprise anyone. It is a rational investor response. As discussed in the past, stock prices are merely the Net Present Value of a future profit stream, discounted appropriately. The value is directly tied to economic growth. It's the same in India and the United States or any other country. The Congress Party government should follow the wishes of its voters and put in policies that moderate growth in favor of more equitable economic distribution. The downside for the voters is that your stock market will crash.
Foreign investors and speculators are being blamed for the crash, but to me that's like blaming somebody for acting rationally.