What is happening in India is that speculators are discovering that there is a difference between a corporation and its share price. And that's a healthy process because it means that the traders there are learning.

What is also happening is that there is a massive unwinding of the foreign carry trade, which was caused by hedge funds borrowing cheap Yen and investing abroad wherever economic returns could be assured. There was nothing essentially wrong with the strategy except that as the trading is very highly leveraged, there becomes a self-fulfilling prophesy kind of effect. In other words, they zoom " on the way up.

And when the source of those funds are cut off, and unrealized profits are taken by the fund managers, prices start to reverse, and they zoom on the way down as well.

Unfortunately, as newbie traders are now learning, prices come down faster than they go up.

Speculative traders are often nobody's fool, so they rush to the exits ahead of the slow-moving herd, hoping to beat a stampede. In India, the word "stampede" does apply, as the Sensex index has plunged -21 pct (almost 2600 points) in 15 trading sessions.

It's hard to write about fundamental or quantitative measures or economics at a time like this because fear and panic in markets is a psychological phenomenon.

Bombay Sensex Index Historical Prices for May 2006