From the last couple of days, the Indian stock markets have been punishing investors. Today was also such a day. Any hopes an investor in the Indian stock markets brings in the morning are beaten mercilessly?
Is the Bull Run in the Indian stock markets over?
Even the advertisements for actively managed mutual funds in India are beginning to remind us that India’s ‘growth story is intact’. Yeah right, tell that to our unrealised and realised losses.
A benchmark index of India, NIFTY 50, has been unable to hold over a significant level of 15,000 convincingly over many days at stretch. Still, the index is not leaving the neighbourhood of 15,000 with closing today at 14,721.30.
What a day was today when not even a single sectoral index is in green today.
Experts provide a somewhat technical explanation that it is not that the bears are winning, but that the bulls are unable to show strength.
International fundamental reason being cited is US Fed announcements.
US Fed outcome was making the investors cautious. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, "The FOMC meet outcome expected today is likely to have an impact on markets. The Fed is likely to emphasize its highly accommodative stance and signal that inflation is not a concern. That will be positive. Any departure from this stance can be negative."
Domestic fundamental reasons that are being quoted by experts for the performance are rising bond yields, inflation, and a sudden spike of COVID-19 cases in some states.
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Vijayakumar continues, "The second wave of COVID-19 cases in parts of the country, though not serious, is an area of concern. Issues relating to the AstraZeneca vaccine in parts of Europe are another concern. FIIs turning buyers again is positive but that is negated by DII selling. In brief, investors have to be cautious."
Furthermore, it is being observed that since that the markets are near their tops, thus a decline in the form of correction is not surprising.
Also, Price-to-Earnings ratio (PE ratio) is being mentioned. A solace is being provided to the investors in loss that Nifty 50 stocks are having high valuations. Thus routine corrections are to be expected is the opinion of experts.
Next, we have rise in bond yields. Harshad Chetanwala, Co-Founder, Mywealthgrowth.com claims, "The rise in bond yields raises the cost of capital for companies, which, in turn, affects their stock valuations. Hence, stock markets across the world are seeing some impact of increasing bond yields,"
He continues, "If central banks allow the yields to go up, it indicates that the liquidity support that has been offered may also go down. Whenever the bond yield increases, investors including FII, prefer to withdraw from equities and look at bonds," Chetanwala added.