Markets have been in free fall mode from last couple of weeks. Both Sensex and Nifty have fallen almost 15 percent in last couple of weeks. Stocks of all sectors especially metal, real estate, auto and banking sectors went down quite badly in this correction . Negative news is pouring into the market from all the ends and as a result investors' sentiments in market are quite negative at the moment. These are some of the major negative news prevailing in the markets:
Crude oil prices:
Crude oil prices are going up without any control and have touched 145 dollar per bbl this week. Analysts are worried about the rate at which crude oil prices are going up in the international markets. Crude oil price has gone up 30 percent in last 1 quarter itself. There are many theories behind this sharp rise. Some analysts believe that the demand from emerging economies has increased sharply in last few years where as the crude oil production is near its peak. Others believe that the speculation and trading activities is driving the crude oil prices in the international markets as people are switching their funds from other investments to crude oil. Rising crude oil prices is one of the main sentiments dampener in Indian stock markets. India imports more than 75 percent of its crude oil needs. Since this sharp rise can not be passed quickly to the consumers it is resulting in surge of oil pool deficit for our country.
Heavy FII selling:
Foreign fund inflows were one of the major factors driving Indian markets in last 2-3 years have turned negative since the start of this year. Foreign institutional investors (FIIs) are selling big time in Indian markets this year. They have sold over 6 billion dollars stocks in Indian markets this year so far. Last year FIIs invested 18 billion dollars in Indian market. FIIs are nervous about the deteriorating global economic situation. Most foreign funds want to reduce their exposure in emerging markets during this uncertain period. Some FIIs are selling due to want of liquidity in their parent companies abroad. FIIs will be hesitant to invest fresh money till they see improvement in the macro-economic environment, political situation and global inflation rate. High Inflation, higher interest rates period: The prices of basic commodities have gone up quite significantly in last few months and hence we have seen high inflation almost all over the world. Inflation is quoting above 11 percent in our country from last couple of weeks. RBI is forced to take tough measures (Reserve bank of India (RBI) increased both the repo rates as well as Cash Reserve Ratio (CRR) in this week to get a control the rising inflation) to take control over the rising inflation. Banks have passed on this interest rate hike by increasing their prime lending rate (PLR). Analysts fear that this may significantly dent the economy growth in India. Political crisis:
Current political tug-and-war over nuclear agreement has added fuel to the negative sentiments in the market. Although in past markets looked unaffected by the political developments but situation is quite different now. Indian economy is going though tough phase and therefore any negative development on central government level may severely hit the market. We are entering into the crucial Q1'09 result season this month. Analysts and investors are carefully following the quarterly results and management talks of various companies/sectors to see the impact of various global events and government /RBI action on businesses . Investors should exercise caution in the market and make any fresh investment after analysis.
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