Good news: Down beta is down

A significant reduction in down beta could lead to sustained reduction in the cost of capital for Indian companies and help foster investments

People who track markets around the world would have noticed a reduction in the sensitivity of the Indian market to the movement of global markets, especially when the latter move in the negative direction. In the recent past, Indian markets have developed a capacity to remain insulated from adverse global shocks like Brexit, the Chinese market crash, the increase in crude oil prices and the trade wars. This phenomenon is examined in a research paper titled Reduction in Cost of Capital in Indian Markets, co-authored by Gautham Kanthasamy and Prasanna Tantri of the NSE-ISB Trading Laboratory. The authors observe that