Mint Quick Edit | Stock market drop: It isn’t about the economy

Even as the Indian stock market tumbles, the economy seems to be humming along, barring sporadic reports of sluggish consumption. Take the purchasing managers’ index (PMI) reading for October released on Monday. The index, which is a gauge of the manufacturing sector’s health, climbed to 57.5 from 56.5 in September. 

Any reading above 50 is positive, since it denotes an expansion (one below 50 means contraction). The margin by which the latest reading exceeds that dividing line is a cause for optimism. This is on top of the GST data released just days ago. 

At ₹1.87 trillion, the GST mop-up in October was India’s second-highest monthly figure since the regime’s rollout in 2017. The automobile industry, meanwhile, has reported increased festive-season footfalls at showrooms, helping reduce a large inventory pile-up. 

Also read: India’s manufacturing activity rises in October driven by growth in new orders

Corporate earnings, though, have shown signs of weakness and equity investors now seem somewhat nervous; the S&P BSE Sensex fell 1.2% on Monday, extending its losses to more than 8% since the 26 September peak of this index. High valuations explain much of this sell-off. It doesn’t reflect weakening confidence in the Indian economy.