The Indian Stock market is falling continuously for the last 4 days. The Major benchmark indices Nifty & Sensex have fallen by around 4% each. With this fall in the market for the third successive session, Nifty 50 has fallen from 18,000 levels to below 17,600 levels, while Sensex tumbled to levels of 59,037.18 on Friday 21st January 2022. So, let’s discuss the possible reasons behind this fall in the market as we move ahead.
- The major reason behind the fall in the stock market is due to the strengthening of the US 10-Year G-Sec Yield which is near around 2% specifically hovering around 1.87%.
- Due to this spike in the yield, the expectation of the interest rates hikes looks to be getting preponed.
- One may question here, Why Interest Rates should be hiked? The simple answer to that is the rising inflation, and to control the rising inflationary situation, interest rates need to be hiked. Here, if we talk about the major constituent behind taking the inflation upwards is Oil.
- Now the crude oil prices are also rising and currently are at $86 per barrel which could also contribute to the rising inflation scenario.
- Due to these reasons- The rising US 10-Year G-Sec Yield and a spike in crude oil prices have created some selling pressures on Institutional Investors especially in emerging markets.
- An Investor should also observe the earnings of the corporate where the margins are being impacted but the profitability of the companies is improving remarkably. Hence, the Earnings Per Share (EPS) of the Nifty PE is increasing gradually, and in these times the market valuations become rational.
What Should Investors Do?
Such a fall in the stock market is a normal correction and one should not look at it as an upcoming crash in the market. These corrections show the volatility features of the market. Here, at this point, one should take advantage of the price or time correction in the market from the long-term perspective. Therefore, one should not time the stock market in the short term, and should proper financial planning with a longer period perspective in the market. The better way of investing in the current situation could be a staggered manner of investing. Follow due diligence before making any investment decisions.