In the past week,the Indian stock market has seen red charts. Earlier on Friday, a decline of 2.87% or 1,650 points was recorded. However, the market got some boost on Monday. On October 19, Sensex had set a record high of 62,245. Since then the Sensex has fallen by 5 thousand points or 8%.
On Friday alone, the market cap has decreased by Rs 7.35 lakh crore due to the fall of the market. The market valuation of listed companies stood at Rs 258.31 lakh crore on Friday. Although it went up to Rs 274 lakh crore in October. There has been a shortfall of about Rs 16 lakh crore.The reasons for the continuous decline in the market are many, let’s discuss these causes.
Omicron variant of Corona
After the new variant of Corona surfaced in South Africa, investors started exiting from risky assets. However, not much information has been revealed about the new variant. But such variants have been found in South Africa, Botswana, Israel and Hong Kong. Scientists believe that this new variant has an unusual combination of mutations. There is a fear that this new variant may spread to other countries as well. This can again have a bad effect on the global economy.
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Increasing restrictions
Some European countries have already taken strict control measures this week due to the hike in corona cases. Austria has imposed a 10-day lockdown. Italy has banned people without a vaccine. The United Nations has already advised Germany and Denmark to be cautious. The 27-nation European Union has banned travel in their countries. The UK has also banned the arrival of flights from South Africa and 5 countries in its proximity.
Falling global markets
The fall in the Indian market can also be attributed to falling global markets. There was a huge fall in the global markets on Friday. Simultaneously, the prices of crude oil went below $ 80 per dollar. European stock markets fell 2.7%. This is the biggest fall in these markets since September 2020. Among them, shares related to the travel and leisure sector fell heavily. The German market fell 3% and the UK market fell 2.7%. This is the biggest fall in these markets in a month.MCI’s index of Asian stock markets fell 2.2%. This is the biggest drop since August. Shares in the casino and beverages sector fell heavily. Similarly, shares related to the travel sector fell more in Hong Kong, Sydney and other countries. Crude oil prices fell 5.7% to $78.38 a barrel. This is because new oil demand could be impacted.
Hot money of foreign investors
Hot money refers to the most volatile foreign funds. Foreign investors have withdrawn money from the market for the seventh consecutive day. On Thursday, these investors had withdrawn Rs 2,300 crore and on Friday Rs 5,785 crore from the Indian market. So this is a negative environment for the market.
Rising inflation
In the policy review of the US Federal Reserve Bank in October, it was said that inflation could increase. Investors fear that central banks around the world may withdraw economic relief. The US central bank has indicated that it may raise interest rates next year.
What investors should do?
The new variant of Corona is definitely a concern for investors. This may hinder the recovery of the global economy. However, such a case has not come to the fore in India so far. But travellers coming from some countries are being screened continuously. Analysts expect the market to remain under pressure in the near term as well. However, it may show improvement in the medium to long term. There is no need for panic selling right now. However, if you are planning to enter the market this is a good dip to buy. In the long and medium-term the market will improve its performance. Moreover, if you want to play safe this is the time when you should invest in gold, gold ETFs.
Since last year, the stock market has become a preferred medium for investment. Especially new investors invested a lot during this period and also earned money. Fundamentals of India are very good and for the last few quarters, along with the earnings of the companies, the gross domestic product figures also increased.