From the last couple of days, the Indian stock markets havebeen punishing investors. Today was also such a day. Any hopes an investor inthe 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 inIndia are beginning to remind us that India’s ‘growth story is intact’. Yeahright, tell that to our unrealised and realised losses.
A benchmark index of India, NIFTY 50, has been unable tohold 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 todayat 14,721.30.
What a day was today when not even a single sectoral indexis in green today.
Experts provide a somewhat technical explanation that it isnot that the bears are winning, but that the bulls are unable to show strength.
International fundamental reason being cited is US Fedannouncements.
US Fed outcome was making the investors cautious. V KVijayakumar, Chief Investment Strategist at Geojit Financial Services, "TheFOMC meet outcome expected today is likely to have an impact on markets. TheFed is likely to emphasize its highly accommodative stance and signal thatinflation is not a concern. That will be positive. Any departure from thisstance can be negative."
Domestic fundamental reasons that are being quoted by expertsfor the performance are rising bond yields, inflation, and a sudden spike ofCOVID-19 cases in some states.
Vijayakumar continues, "The second wave of COVID-19cases in parts of the country, though not serious, is an area of concern.Issues relating to the AstraZeneca vaccine in parts of Europe are anotherconcern. FIIs turning buyers again is positive but that is negated by DIIselling. In brief, investors have to be cautious."
Furthermore, it is being observed that since that themarkets are near their tops, thus a decline in the form of correction is notsurprising.
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 havinghigh valuations. Thus routine corrections are to be expected is the opinion ofexperts.
Next, we have rise in bond yields. Harshad Chetanwala, Co-Founder,Mywealthgrowth.com claims, "The rise in bond yields raises the cost ofcapital for companies, which, in turn, affects their stock valuations. Hence,stock markets across the world are seeing some impact of increasing bondyields,"
He continues, "If central banks allow the yields to goup, it indicates that the liquidity support that has been offered may also godown. Whenever the bond yield increases, investors including FII, prefer towithdraw from equities and look at bonds," Chetanwala added.