Stock Market Slump Not Due To Budget


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The BSE Sensex has settled just above the 34,000 mark today after opening below that in opening trade as Tata Motors, TCS, BHEL and Hero Motocorp among top losers with up to 5% cuts. Markets extended losses after continuous fall from the high of 36,400 it achieved in late-January on account of global risk-off trade.

To understand the context, the markets have only scaled back what it had gained in January in what could only be called a melt-up phase where markets displayed a euphoric rise across the globe.  Global markets have moved in sync and we cannot blame our recent fall on local issues.

The trigger for this phase of market correction has been the better than expected economic data in the US, causing an alarm of sharper than expected rate hike by the US Federal Reserve. Global stocks and commodities like Crude Oil tanked as Global Bond yields and Gold gained.

As we can see the sharp spike overnight on the 1st  of February in Us Bond yields was followed by a selloff in relatively riskier assets like equity markets including India.

Indian markets may see further volatility tomorrow as Global markets still display sharp moves.

Our markets will deal with further news flow from the RBI policy statement. RBI’s views on inflation are likely to be hawkish given pressures from Crude oil and Government’s MSP hike push and fiscal deficit numbers adding to inflation. It may also cut growth forecast for FY18 which may impact our stock markets.

What lies ahead for Indian equity investors?

BSE Sensex is still up 40% from January 2017 levels and systematic long-term investors have made a lot of money over the last 12 months despite the recent fall, as Indian macros and policy stability improves along with visibility of future growth both locally and globally.

The year 2018 is a pre-election year. It comes on the back of a blockbuster 2017. Volatility is likely to be high throughout the year as elections come and political news grips the markets. Depending on which side the political winds blow one may see the stock markets react sharply either side and in such a scenario, investors are likely to tread with caution in the run-up to the general elections.

The writer is an e-tailer and wholesaler in textiles; he invests in equities and real estate ; he wishes to stay anonymous


  1. Thanks for an insightful little piece, Narad ji.

    For the less well equipped with the workings of the ‘market’, what is meant by ‘global risk-off trade’ in the first para?

    • Abhishek ji,

      Global risk-off trade refers to a market phase where all assets perceived as risky , usually growth assets, such as equities and commodities fall. US $ , bond yields, gold rise during such phases as “safe-havens” and less risky.

      When equities/commodities and other such growth driven assets rise markets are in a risk-on phase.

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