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Sunday, February 16, 2014

The 'Myth' of the Stock Market as the Barometer of the Indian Economy (by Vishal R. Choradiya)

From sensationalised coverage on prime time television to small talk amongst friends at a wayside tea stall, the combined movement in the prices of stocks traded at markets such as the Bombay Stock Exchange (represented by the SENSEX) is widely regarded as the performance of the Indian economy itself.  A dramatic upsurge in the aggregate index points is typically greeted with self-congratulatory affirmations of a booming, prosperous economy; and a sharp fall is contrastingly met with gloom, panic, and grave predictions of an imminent economic doomsday.  Over time, this association between the enumerable performance of the stock markets and the relatively unquantifiable state of the nation’s economic health has come to be naturalised.


This relationship may be understood as a Barthesian ‘myth’—a second-order semiological system, and a collective means of conceptualising an abstract subject matter.  Here, the performance of the stock market captured by its index, e.g. the SENSEX, is the sign or the ‘meaning’ in the first system.  This meaning, in the greater, mythical system, functions as a signifier, referred to as the ‘form’.  The corresponding signified is the condition of the country’s economy, constituting the mythical ‘concept’.  And the correlation thus established between the form and the concept is the ‘signification’.  Together, they comprise the myth that the stock market is a barometer of the Indian economy.


It is interesting to note that the performance of the stock market, as meaning, is capable of being read and understood even before it dons the role of the signifier.  For instance, the SENSEX, in itself, is an index of the stocks of thirty well-established and financially sound companies listed on the Bombay Stock Exchange.  Hence, it has its own value and would be self‑sufficient and complete even if myth did not grab it and transform it into an empty, parasitical form.  In fact, even when it becomes a signifier, it does not altogether lose its original value; it is only temporarily distanced or put on hold for signification.  Further, the SENSEX is not a symbol; it is capable of constantly returning to meaning, deriving from it, and even hiding there.  According to Roland Barthes, it is this game of hide-and-seek between the meaning and the form which defines myth.


On the other hand, we have the mythical concept, i.e. the state of the economy as a whole.  It defies simple quantification (unlike the performance of a stock market), being as it is an unstable, nebulous condensation.  Unsurprisingly then, the knowledge contained therein is necessarily confused; made of yielding, shapeless associations.  It has at its disposal an unlimited mass of signifiers: just like the stock market, macroeconomic indicators, international credit ratings, and even the state of a single Indian family’s finances can signify the state of the entire Indian economy.  Evidently, the mythical concept is characterised by its lack of fixity.


At the level of signification, the stock market is intended as an indicator of the economy than literally the economy itself.  Yet, this intention is somehow made absent by the literal sense; the signification therefore appears at the same moment both as a representation of the state of the economy and a factual statement of the economy itself.  Of course, this association is not arbitrary; it contains an analogy.  This can be illustrated by the case of the Bombay Stock Exchange, whose stocks are representative of various industrial sectors of the Indian economy, and the composition of which is constantly reviewed and modified to reflect current market conditions.


However, the association is also partly motivated.  In this context, Jayati Ghosh, writing for Frontline, remarks that “so much of the presentation of economics news, especially in the financial press, is oriented to the behaviour of stock markets” since the business interests of “the mainstream English language media...coincide with those of financial capital”, and that “these media also do not reflect the interests of the Indian people, nor do they even understand them” (“Stock market and”).  Hence, it is apparent that despite the analogy between a stock market and the entire economy, the myth would not exist without motivation, and such motivation is not natural.


As with most myths, this one also works with a poor, incomplete image where the meaning is contracted to prepare for a signification.  At any given point in time, the performance of the various stocks representing diverse industries is summed up by a single relative number, either positive or negative.  This number does not communicate the voluminous information and complexity that governs the trading decisions and sentiments that go behind it.  And in this condensed state, it becomes susceptible to the association.  Further, of all possible signifiers, the stock markets are typically chosen because of the instant sense of gain or loss they convey, and the enormous sums of money they involve, causing an immediate impression.


Let us now look at how this myth is received.  As laid out by Barthes, this can happen in three distinct ways, depending on the manner in which one focuses on the duplicity of the signifier, in this case, the stock market.  Firstly, the journalist or the media (already discussed above), as the producer of the myth, would consider the stock market as an ‘empty’ signifier, letting the concept fill the form of the myth without ambiguity.  So the SENSEX here would become part of a simple system where the signification is literal—the media chooses to make it a symbol for the state of the entire economy.


Secondly, the mythologist focusing on the stock market as a ‘full’ signifier is able to understand the distortion which the meaning and the form of the stock market impose on each other, and consequently, undo the signification of the myth.  So for the mythologist, the SENSEX becomes the alibi of the economy.  In this case, finance experts would function as mythologists, uncovering the imposture.  In the aforementioned piece, Ghosh also remarked in reference to the stock markets that “the uninitiated can be forgiven for thinking that their movements actually reflect real economic performance...” (“Stock market and”).  Similarly, writing for The Hindu, C.P. Chandrasekhar observes that “there is a divergence between stock market performance and real economy trends...  the market does not reflect in any way the real ‘fundamentals’ of the economy” (“The Sensex and”).  Also, writing specifically about the SENSEX for Moneylife, Vivek Sharma notes that “the Sensex has always been termed as the barometer of the economy...  (but it) does not seem to represent the Indian economy correctly.  The movement in the Sensex often misrepresents the behaviour of the Indian economy in general” (“Why Sensex is”).  Finally, Mukul Sharma, an economist, financial planner and adviser, in a lucid blog post, clarifies as follows:


While SENSEX (for that matter any index reflecting stock market performance) is a good indicator of the performance of the economy, it can never be, or at least should never be taken as a barometer of the Indian economy.  It is important to understand that movement in share prices always reflect “market sentiments” of investors...  In a way that is an opinion of the market on the expectations about the future performance of companies listed on the stock exchange.  Movements in share prices can always indicate economic health, but never measure it.  (“Is SENSEX a”)


Lastly, the common man, as the reader of myths, tends to focus on the stock market as a ‘mythical’ signifier, unable to distinguish between the meaning and the form, and thereby receiving an ambiguous signification.  He consumes the myth, and for him, the stock market is not a symbol of the economy as a whole, but the economy itself.  In effect, the reader lives the myth as a story at once true and unreal.  This occurs because, as we already know, the association between the stock market and the economy has come to be naturalised.  Therefore, the myth-consumer ends up reading the myth as a factual system, whereas it is merely a semiological system.





Barthes, Roland.  “Myth Today”.  Excerpts from “Myth Today” (1957).  N.p., n.d.  Web.  14 February 2014.

Ghosh, Jayati.  “Stock market and the real economy”.  Frontline 22 May 2004.  Web.  14 February 2014.  <>.

Chandrasekhar, C.P.  “The Sensex and the economy”.  The Hindu.  7 April 2013.  Web.  14 February 2014.  <>.

Sharma, Mukul.  “Is SENSEX a barometer of the Indian Economy?”.  13 December 2011.  Web.  14 February 2014.  <>.

Sharma, Vivek.  “Why Sensex is not the barometer of the Indian economy”.  Moneylife.  8 October 2012.  Web.  14 February 2014.  <>.

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