Why Stock Market is Falling: There was a big fall in the stock market this week. Investors, especially foreign institutional investors, were seen selling after last week’s spectacular rally. Look at the data, this week, a total decline of 1775 points was seen in the Sensex and 526 points in the Nifty. But the question arises, what has deepened the fear in the market, due to which investors are seen selling. Let’s explore five reasons for the downturn in the market.
1. Effect of the new variant of Corona
The new variant of the corona virus, Omicron, is spreading its feet. Especially in European countries. The number of Omicron patients has doubled in Denmark, South Africa and the UK. Restrictions have already been imposed on travel, investors are again apprehensive of strictness like lockdown. Many companies have canceled plans to call their employees to the office. In India too, the number of Omicron patients has crossed 100. In such a situation, the fear of derailment of the economic development vehicle which was coming back on track has started haunting. From IMF to many rating agencies are reducing the growth figures. This is the reason why investors are selling.
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2. Effect of rising inflation
Inflation is at its peak in all countries. Inflation in the US has reached a 39-year high of 6.9 per cent, while in the UK it is at the highest level since November 2011. The figures of wholesale inflation in India have reached the highest level of 3 decades. Inflation based on wholesale price has reached 14.23 per cent in November due to rising food prices, costlier fuels and metals. The market fears that raw material is becoming expensive for the industry, in such a situation the cost of making any product will increase, due to which things will become expensive, in such a situation the profit margin of companies may decrease. This is also one of the main reasons for the fall of the market.
3. Risk of interest rate hike due to rising inflation
The interest rate was very low for the last several years. But due to the rise in inflation, all the central banks of the world are indicating to increase their policy rates. The Bank of England has also increased interest rates. At the same time, the Federal Reserve of America has also indicated to increase the interest rate. It is believed that due to rising inflation in India, RBI may have to take a decision to increase the interest rate in the new year.
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4. Foreign investors sell off
Among the main reasons for the sell-off in the stock market, there is also apathy among foreign investors. Foreign investors are seeing the Indian stock market as expensive due to the continuous rise. This is the reason why foreign investors have sold shares worth Rs 51,283 crore since November.
4. Long Holiday of Christmas and New Year
Christmas is next week and only two weeks later the whole world is going to celebrate the new year. In most countries, there are holidays from before Christmas to the first week of the new year. Due to which investors avoid making new purchases in the market, in such a situation the volume in the market also decreases. This selling is seen in the market due to lack of buyers.
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