Markets In Correction Mode
Editor-in-Chief of indiacommentary.com. Current Affairs analyst and political commentator. Author of Cyber Scams in India, Digital Arrest, The Money Trap and The Human Hack
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By Sunil Garodia
First publised on 2024-05-10 03:16:15
About the Author
Editor-in-Chief of indiacommentary.com. Current Affairs analyst and political commentator. Author of Cyber Scams in India, Digital Arrest, The Money Trap and The Human Hack
View all posts by this Author
After volatility and general weakness in the last few trading sessions, the stock markets crashed hugely on Thursday. The Sensex lost 1062 points or 1.45% and the Nifty was down by 345 points or 1.55%. Investor wealth worth Rs 760000cr was wiped out. A sense of uncertainty prevailed in the broader market and except for auto and ancillaries; all sectors were in the red. The BSE market capitalization went below Rs 40000000cr.
So why are the markets spooked?
There are several factors that have pulled the indices down in the last few trading sessions after the new highs achieved before that. There is rising uncertainty over the election results, with voter apathy and extreme conditions resulting in lower voter turnout. Although the market is not worried about the third term for Prime Minister Modi, it feels that the results will see the BJP/NDA getting a lower number of seats than in 2019. Hence the bulls are retreating and the bears seem to be tightening their grip.
The other big factor is high valuations. Most observers, especially the FPIs, feel that prices are overvalued. At these prices, there always will be selling pressure as many investors would like to book profits. FPIs have become net sellers for the last few sessions, giving a chance to the bears. Other Asian markets have performed better in the last one month as the PE ration is lower. FPIs feel Indian shares are grossly overvalued. Then RPG group chairman Harsh Goenka also warned investors about a 'Harshad Mehta-type' scam brewing. That has also scared some retail investors.
Further, there is concern over rising inflation in the US as that will mean that the Fed will not cut rates. The prolonged heat wave in many parts of India has increased the prices of essentials, especially fruits and vegetables and there are fears that it will lead to higher inflation which will not be easily tamed.
Apart from this, the geopolitical concerns and Q4 earnings, which were in line and not spectacular, have also weighed in to tame the euphoria. Markets are in correction mode and it is difficult to see this trend changing before the election results are announced. Trading sessions henceforth are likely to be volatile and the sentiment is likely to remain negative.
