- Date : 24/08/2022
- Read: 3 mins
Sensex fell 1.1% on Monday
This year has been volatile for the stock markets. The rise in the last 1.5 months has erased all the losses of this year. The sudden surge in the stock markets was unexpected. But on Monday, the Sensex fell 1.1%. The Nifty50 fell 1.08%. The bank Nifty was down 1.5%, and the VIX was up 4% as it crossed 19. The weak global cues meant that the S&P500 fell by 2.14%. The Nasdaq Composite index was down 2.55%.
On Tuesday, the markets started weakly, but as the day progressed, the markets were flat. So, what is the reason for this fall and why this sudden volatility in the markets after a good 1.5 months? Read more to know…
Why did the markets fall?
The reasons for the fall were:-
- Hawkish commentary by the US Federal Reserve
- The rise of the Dollar index
- Minutes of the RBI MPC meeting indicated more hikes in the repo rate going forward
These three reasons were responsible for the fall in the markets on Monday.
Patience is the key
As per the experts, this small correction was expected after a vertical rise in the last 1.5 months. The Nifty reversed from around 18,000 levels and is now at 17,500. The supports are at 17,500, 17,350, 17,150 and 17,000. As long as the Nifty remains above 17,000, the trend seems to be bullish, and investors can buy the dip from 17,000 to 17,500.
The Federal Reserve’s chair Jerome Powell has a speech on Friday, and it will be closely watched by the experts to ascertain the future policy of the Federal Reserve. The dollar index has crossed 108, and the 10-year treasury yield is at 3%. Everyone is looking at the inflation numbers every month and if the Federal Reserve can return to normal inflation of around 2%. Also, there is some chance that the Federal Reserve will adjust to a higher level of inflation than 2%.
The Nifty is trading at 22 times trailing earnings, which seems fairly valued. The FPI inflows, global commodity prices, inflation numbers, etc., are some of the factors to look at for future direction. As long as the inflation is high, the markets can remain volatile as there is pressure on central banks to keep inflation in check.