Any fall in crude oil prices have usually met with a standing applause from the equity markets. But this time around, as crude tumbles to a 19-month low, the markets are not even acknowledging the event; celebration is a far cry.

A reduction in crude prices is seen as anti-inflationary as it provides the government with much-needed elbow room to reduce the administered prices -- whether they actually do so or not is immaterial.

The industrials and service sectors, which use downstream petroleum products, also heave a sigh of relief, as their operational costs come down.

After the derivative triggered unwinding in May-June last year, which made the Sensex take a 3,872-point plunge to a nadir of 8,799, it was the slide in crude prices in July that nursed the markets back to health.

Crude made an all-time high mark of $77.95 a barrel on July 14. It then went bungee-jumping to touch a low of 55.08 on November 17. Crude fell 29.34 per cent during the period and the Sensex rose from 10,678 to 13,429 during the same period, returning 25.76 per cent.

However, this time, when crude fell 15.79 per cent from $64.15 a barrel on December 20 to $54.02 on January 10, champagne was not uncorked in the equity markets. The Sensex budged just 0.16 per cent when crude was sliding.

Before we go on to investigate this act of indiscipline, let's look at the Dow Jones Industrial Average also. The DJIA rose in the July-November period by 14.92 per cent when crude plunged 29.34 per cent but moved only 0.17 per cent in December-January, when crude slid 15.79 per cent.

Now that we have an alibi in the form of DJIA, with near-identical directional behaviour, we can settle down for some armchair investigation.

The weakness in crude has been matched by other commodities as well. If you were to measure the fall of commodities from their December highs to January troughs, you will find that gold has slumped 8 per cent, aluminium 11 per cent, silver 16 per cent and zinc 25 per cent.

One of the reasons the commodity pundits attribute to the recent slump is the rebalancing of the weights in the Dow Jones-AIG Commodity Index. But portfolio reshuffling has begun only this week and should be complete by January 15. That does not explain the weakness prior to the current week.

Even if you were to believe what is being dished out as gospel truth, the ground realities do not re-affirm the theory. While a weekly gain of 6.3 per cent in natural gas, which has seen its weightage increased from 7.3 per cent to 12.5 per cent, is understandable, a weekly loss of 0.63 per cent in sugar is not, which has seen its weightage going up to 3.1 per cent from 2 per cent.

Similarly, a 3.58 per cent rise in corn, which has seen its weightage being trimmed from 9.2 to 5.6 per cent, is not explained by this phenomenon. Natural gas may not have risen from its weightage change as much as due to the change in weather in the US.

I think global investors are reducing their exposure to the commodities and emerging markets, which should explain the current state of affairs. In December 2006, the FIIs sold stocks worth Rs 3,593 crore (Rs 35.93 billion) and the selling has continued in January. In December 2005, on the other hand, the FIIs had bought stocks worth Rs 9,600 crore (Rs 96 billion).

One other reason why stocks have not moved up when commodities, especially crude, have been walloped, is that a global slowdown of the economy may be on the cards.

Economists are scared by the near 25 per cent slide in copper in the last six weeks. Copper, they say, is a metal with a doctorate in economics and a slide is seen as harbinger of an economic slowdown, something that the equity markets are yet to acknowledge. Factoring it in will come later.

Disclaimer: Financial advisory Anagram may have recommended stocks earlier at lower levels.