look news india
A very shocking and worrying period is going on for the Indian stock market and investors. The stock market which was once ‘bye-bye’ i.e. skyrocketing on the basis of continuous buying, is now becoming the time of ‘bye-bye’ (saying goodbye) for investors. The huge and continuous decline in the National Stock Exchange’s main index Nifty has shaken the records of the last 15 years. Market experts and analysts believe that the speed at which the market is slipping is pointing towards the worst performance in the last one and a half decade. This huge recession is having a deep impact on the hard-earned money of mutual funds and retail investors. There is only one question in the minds of investors from the country’s financial capital Mumbai to small towns that what are the real reasons behind this sudden historic decline and is there still a possibility of further decline in the market.
Record breaking recession and huge dent in investors’ wealth
The history of the Indian stock market has seen many ups and downs, but the recession being witnessed at present has given investors sleepless nights. Due to continuous selling phase in Nifty and Sensex, investors’ wealth worth thousands and lakhs of crores of rupees has been wiped out in a few days. Seeing this pathetic situation of the market, even big investors have been forced to rethink their strategies. Analyzing the historical data of the last 15 years, it comes to light that the current trend of the market has reached a very weak position from both technical and fundamental point of view. Small retail investors who had invested money in IPOs and shares are facing huge losses. This disappointing market environment has created a sensation everywhere and investors are not able to understand how to save their portfolio in this falling market.
Reason No. 1: Rapid selling by foreign institutional investors (FIIs)
The first and biggest reason behind this severe decline in the Indian stock market is the indiscriminate selling by foreign institutional investors i.e. FIIs. Foreign investors are continuously withdrawing their money from Indian markets and investing in US treasury yields and other global markets. When large foreign investors sell large amounts of their holdings in an emerging market, the index is expected to fall. Global economic uncertainties, US interest rate equations and the attitude of foreign funds have badly broken the morale of the Indian stock market. Domestic Institutional Investors (DIIs) tried their best to control the market, but their efforts are proving inadequate in the face of this rampant withdrawal of foreign capital, due to which the Nifty is continuously falling.
Reason number 2: Weak quarterly results of companies and inflationary pressure
The second biggest reason for the decline in the stock market is that the quarterly financial results of the country’s major corporate companies were much weaker than expected. Many big companies in automobile, FMCG, banking and IT sectors have registered a decline in their profits, due to which the confidence of investors has been shaken. In addition, the inflationary situation in the country and around the world and the policies of central banks to keep interest rates at high levels for a long time have increased the borrowing costs of companies. When both the sales and profits of companies are affected, it is natural for their share prices to fall. Due to rising costs and slowdown in demand, the fundamentals of the market have weakened, which is having a direct impact on the movement of Nifty.
Reason No. 3: Global geopolitical tensions and fluctuations in crude oil prices
The third and most important reason is the ongoing serious geopolitical tension at the international level and instability in crude oil prices. The global supply chain has been severely disrupted due to the ongoing wars and conflicts in many parts of the world. India imports most of its crude oil needs, hence increase in oil prices in the international market or supply stoppage has a direct impact on the country’s current account deficit (CAD) and fiscal position. Apart from this, fears of recession in the global economy have also greatly limited the risk appetite of investors. Whenever uncertainty increases at the international level, investors start withdrawing money from risky markets like shares and run towards safe investment options, due to which the Indian market is also suffering the brunt of it.
The way forward for investors and advice from market experts
The way Nifty and the stock market are falling at present, it is clear that the coming few weeks are going to be full of ups and downs for investors. Market experts say that investors should avoid panic selling at this time, because falling and rising of the market is a natural process. Investors who invest in companies with good fundamentals from a long-term perspective should remain patient even in times of recession. However, new investors are advised to take the advice of financial advisors and understand the risks well before investing money in any stock. This worst period in 15 years is a wake-up call for the Indian economy and market, from which policy-makers and investors can learn and strengthen future strategies.