Why market goes down in last month, what is relation with US and stock market?

Question

Some times, in last month sensex came down to 14000-, what is the reason exactly, I saw in few news papers that there is relation between US housing loans or dept and Indian (even world) stock market. What the reason exactly?

Answer 1

Yes, the problem is called sub prime loans.

Americans with bad credit rating, who are poor etc. can't get regular loans. So they get sub prime loans- with higher interest rates. Since Americans are in debt to eyeballs, many started defaulting on such loans.

But, by that time, these debts have been sold off as financial papers over the entire world. Once defaults started, investors found themselves with worthless papers, and panic arose.

Also, whenever something happens in major economies, other economies feel it, too.

This problem shaked the financial world, partly because of panic, partly because of investors stuck with these worthless papers. The problem hit just about every stock market.

Answer 2

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Answer 3

The global economy is very intertwined .
Countries buy products from each other all the time .
The US buys huge amounts of inventory from China , India and S E Asia in general .
If US peoples have big drop off in income because of loosing their homes in foreclosure . . .
Then sales of many other things fall too .

The economy is like cigarette smoke , it mixes up all around .

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