Why does the U.S. Market activity affect India?

Question

The Indian markets, for that matter, any emerging markets seem to follow suit with the US markets. If the US closes in green, everyone expects a gap up opening here in India and If a red closing in wall st, then a red opening in India. Why does this happen? Are there Foreign Investors who buy and sell on a daily basis only based on US markets and not based on the fundamentals of the company they are investing in? Can anyone explain this phenomenon... What has US stocks got anything to do with opening of Indian or any other emerging markets?

Answer 1

One word: Follow the money trail.

60% of India's equity market is in the hands of FIIs: Big boyz of the trade like Citi, Goldman etc.. They buy/sell/short in India on a daily basis. Their core team still makes there calls largely based on market conditions in US. Another reason is that these FIIs do a lot of margin trading. So to meet margin calls in US during a sell off they sell equities in India and elsewhere to raise cash.

Answer 2

USA has a GIANT Economy tied up with almost all the countries of the world.. The total investment of the USA outside its shores is thrice the amount of investment within its own country.
During the GREAT Depression (1929 to 1932).....the US Economic Depression had shaken the world and the world gets worried when US Economy shows signs of Recession.
It's 21st century , when USA has spread out everywhere.During the GREAT DEPRESSION , it was not that much.Yest, the World was shaken by its impact.
That's the reason, Index at Broadway is closely watched by all Investors.The rise or fall of the US Index affects India and the world as a whole.