I would like to bring to light some of the major events & their impact on the Share market. Recently, Greek referendum was in news and lets discuss the impact of this particular event on the market.
On July 5th 2015, the world was watching the outcome of the Greek referendum. When the results came, as expected Greek public voted 60:40 against Eurozone’s term to remain in the single currency. That would have implied Economic & Political turbulence , Greece defaulting on the huge debt of around US$300bn.
Surprisingly, the SENSEX closed 116 points upward on 6th July, the next day of the event.
Given that the NEWS was Negative, it was expected that the market will see a downward movement. But since the topic was widely discussed all over the world & flashed extensively on all the NEWS channels, the market had already witnessed the fall implying that the expectation of the Negative outcome from the referendum was already Factored in by SENSEX falling by more than 1000 points in the last month.
Something similar happened in 2008, when the Sub Prime crisis actually took place. The further fall in the market was limited as the event was already expected and was factored in.
But the real shock that actually triggered the Share market fall was the Bankruptcy of Lehman Brothers & Subsequent emergence of other Investment Banks in crisis which wasn’t expected.
This can also be seen in case of company’s results. When it is expected that the result is going to be bad. And when the actual result comes in line to the anticipated result, the share price most likely move up.
The point which I am trying to make here is that, if something is expected & largely debated in News Channels & Newspapers, investors & traders panic which lead to market falling & absorbing that event. But when the actual event take place, there is not much of impact on the index. Same is applicable to positive News as well.