For analytical purposes, macroeconomic developments over the last five years can be divided into three distinct phases: (i) The global financial crisis and RBI’s response; (ii) Exit from the crisis and RBI’s struggle with growth-inflation dynamics; and (iii) The external sector strains which have accentuated over the last few months and RBI’s efforts to restore stability in the currency market.
For example, in the context of various pooled investment vehicles, investors may have an incentive to redeem their shares early because the costs of the redemptions are effectively borne by remaining investors. The resulting “first-mover advantage” contributed to runs on money market mutual funds in the fall of 2008 and could, at least in theory, lead to runs on other open-end fund vehicles.