Hi, today around 2 pm Nifty and Sensex are trading down 3.28% and 3.24%.
In the last one week, the Sensex and Nifty have become almost 6% down.
So today we're going to tell you what's behind it, and what you and we, as retail investors, should do.
Before proceeding, I would like to request you to subscribe to the Groww channel if you are getting value and helping in your investment journey.
So let's start with the reasons first.
Reason 1- Falls in the market has been going on since the last month
when the new Omicron variant of COVID-19 saw a spike in COVID cases across the world.
Travel restrictions, lockdowns, and different preventive measures began to be taken in many different countries.
In such a situation, due to the third wave of COVID in India, lockdown can also be done.
All these actions have a direct impact on the economy and business and due to this, the markets started reacting negatively.
Reason 2- Russia Ukraine border tensions.
Another major reason is the increasing border tension between Russia and Ukraine.
If Russia invades Ukraine, then Western powers like European Union (EU) and the US impose sanctions on Russia.
And its impact may be on global markets.
It is because Russia is a commodity powerhouse.
Russia is a major supplier of natural gas, metals, and agricultural products to many countries.
For example, Russia is the largest exporter of energy products such as oil and gas.
Russia is also a major exporter of metals such as aluminum, copper, nickel, platinum, and palladium.
Russia is also the largest exporter of wheat.
Therefore, any sanctions imposed on Russia significantly affect the commodity market.
It will also have a huge impact on the Indian markets as the prices of goods and services will increase due to an increase in oil prices.
And India is also dependent on Russia for its energy requirements.
As you may know, the government will announce the budget on February 1, 2022.
But as per experts, assembly elections is going to be held in 5 states immediately after the budget.
So, speculations are that the central government may also announce a populist budget that will benefit them in the coming elections.
So this may also create a negative sentiment in the market.
Apart from this, another is a big reason why crude oil prices are increasing very fast.
Crude oil prices are at record levels and have crossed more than $ 88 per barrel.
Crude oil as we all know is a commodity on which almost all economic activities and industries depend.
Therefore, an increase in the price of crude oil leads to an increase in the prices of goods and services and increases inflation.
That's why you must have heard that the global inflation rate is also at its record level.
When inflation rises, central banks take action to control it.
Our next reason is also related to this.
At the time of COVID-19, the central governments and banks announced many relief and stimulus packages.
These brought additional liquidity in the market and all that money flowed into equity instruments i.e. stocks and mutual funds.
Central banks around the world are concerned about rising inflation and want to absorb excess liquidity from the market to control access.
In such a situation, central banks are accelerating their bond-buying scheme.
The US Fed has also indicated that it may raise interest rates in a series of ways that could last until 2023.
And they can implement the plan sooner than expected.
Because of these reasons, the US 10-year GSEC bond yield has increased and is around 1.8%.
These yields are the highest level since the pandemic.
The capital of major institutions mainly goes into 2 asset classes – equity and debt.
The rise in US 10-year bond yields is an alternative development for equity investment that can move large institutions from equity to debt.
And if it does, then the selling pressure in the market could lead to such corrections.
And in such a situation, institutions can start withdrawing their capital from emerging markets like India.
Due to the high valuation of the Indian market and some other reasons,
you must have also noticed that FIIs and FPIs have been net sellers in the Indian market for some time now.
So these are all the big reasons which the market is going down.
As a retail investor but now, what should we do?
First of all, you should not panic during such market falls.
You should look at it as a market correction, not as a market crash.
Such corrections are healthy after a long bull run in the Indian market and should be viewed rationally.
Our previous video also suggested you avoid lump sum investment.
And have continued your SIP if you invest in mutual funds, so that you get the benefit of average.
If you follow the method, then your risk will also be less and you will also be able to take advantage of such future market corrections.
As per direct stocks, you should invest in quality and fundamentally strong companies whose earnings and net profit are consistently increasing.
Do not invest for the purpose of making quick profits as you can also lose your capital in volatile times.
Don't try to predict what will happen in the next 10 days, 1 month, 6 months, or 1 year.
And before making any kind of investment, do our detailed research and analysis and only then make a decision.
I hope you liked this small update of today.
As soon as we get any more important updates, we will again bring you a video soon.
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