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Sensex loses 1000 points in a week; what's next?

Sensex loses 1000 points in a week; what's next?

 Feb 10, 2018

The Sensex has lost over 1,000 points due to various reasons during the last week ended on Friday. Nifty has lost around 2.54% during this time. Though many stocks survived the fall, most of the stocks lost its value. Global volatility, new budgetary proposal to impart capital gain tax etc are some of the most prominent reasons for the selloff. Higher inflation, potential tightening of liquidity and the rising bond yields are pointed out to be the other reasons. The high drop in the value of Sensex is considered as the worst one since August.

On Friday itself, Indian Sensex shed 407 points as an impact of a 4% dip in Chinese equities. For China, this 4% loss was the largest single-day losses since February 2016.

Experts advised that any correction due to the volatility in the global markets should be used as an opportunity to buy quality stocks. They also said that the valuation of Indian shares still has more rooms to grow.

But some other advisors warn to take caution. Their argument is that due to the rising borrowing costs and soaring volatility, the global market is passing through the biggest crisis since the eurozone crisis in 2011.

All major markets from Europe to Asia have wiped off on an average 10 per cent of their market-caps in the last week.

Indian has some green signals to count. The key is the better quarterly results from the companies. Pharma companies are coming out with positive results. Automobile sales volume also showed good signs of a revival in sales. Moreover, the RBI decision to keep the repo rate as it is also will help the market in the coming days. But still, the inflationary pressure is still a big worry.

The key factor to watch is the recovery of US market and other Asian markets. If the US downtrend is temporary, then it is for good. Otherwise, it will be the beginning of a larger bearish trend. Beware!

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