In India, the fall was driven by FPIs liquidating their position in anticipation of liquidity absorption moves by the US Federal Reserve in response to high inflation.
VOLATILE STOCK markets are undergoing a sharp correction driven by a sell-off in global markets amid indications that the US Federal Reserve will tighten liquidity and hike interest rates.
On Monday, the benchmark Sensex crashed by 2,000 points intra-day, or 2.62 per cent, before closing with a loss of 1,546 points at 57,491.51 — over the last five trading sessions, it has lost 3817 points or 6.2 per cent. The NSE Nifty Index plunged 468 points, or 2.66 per cent, to reach 17,149.10.
The fall was in line with weakness in the European and US markets. While premier indices in UK and Germany fell 2.4 per cent and 3.5 per cent, respectively, the Dow Jones Industrial in US was down 1,080 points or 3.2 per cent Monday (11 pm IST).
Nasdaq, too, was down 4.5 per cent.
In India, the fall was driven by FPIs liquidating their position in anticipation of liquidity absorption moves by the US Federal Reserve in response to high inflation. According to the provisional data with stock exchanges, the FPIs pulled out a net of Rs 3,751 crore from Indian equities on Monday, taking their net outflow over the last nine trading sessions to Rs 15,817 crore.
Experts say markets are likely to remain weak and volatile in the near term as investors are bracing for the Federal Open Market Committee (FOMC) meeting on January 25-26, where it is expected to confirm how soon it will start sucking out the liquidity that has supercharged growth in stocks in recent years.
According to a Morgan Stanley report, the reason for the Fed’s sharp pivot is obvious as inflation has overshot its goals, leading to turbulence for the real economy and a political tightrope walk for the White House. When the Fed first announced its inflation-targeting policy in summer 2020, it was appropriate given the deflationary effects of the pandemic. Therefore, it’s now just as appropriate for the Fed to tighten at an accelerated pace to fight the inflation overshoot, the report said.
According to a Morgan Stanley report, the reason for the Fed’s sharp pivot is obvious as inflation has overshot its goals, leading to turbulence for the real economy and a political tightrope walk for the White House. When the Fed first announced its inflation-targeting policy in summer 2020, it was appropriate given the deflationary effects of the pandemic. Therefore, it’s now just as appropriate for the Fed to tighten at an accelerated pace to fight the inflation overshoot, the report said.
Analysts see a huge business opportunity for India over this decade as businesses will witness a surge in exports, import substitution, and benefits from PLI over the coming years. They expect long-term investors to use this opportunity to add those companies to their portfolio that are seeing a correction in valuation but have solid long-term growth prospects.
But they warn that investors should not rush in all at once, but phase out their investment over the next couple of months since valuations in certain parts of the market “are still frothy”. “Our sincere advice to investors is to invest only in companies that have a profitable business model and are leaders of their high-growth industries,” Agarwal said.
Reference Link:- https://indianexpress.com/article/business/market/equity-markets-live-updates-stocks-shares-bse-sensex-nse-nifty-january-24-7738838/