WHAT TRIGGERS THE MARKET?
By Ruma Dubey
To say that the markets are behaving extremely Quixotic is being polite. The wild ups and downs, and sometimes the complete listless trading makes one run around to find reasons. Earlier, it was the other way round – we analyzed the fundamental and macro economic factors and then predicted the way markets would behave the next day. Now, to some extent the same ways hold true but given the way in which Japan, Europe, China and the rest of the globe performs, the market moves diagonally opposite of what we thought it could so then we scramble around trying to fit reasons to the fall or rise of markets. The market rises when it had to fall or vice versa – we try to wrap our mind around it by justifications like below/above expectations, no rate cut, better numbers, marginal improvement in China/USA, rising crude and yen, Parliament logjam, GST or no GST, it just goes on. The best part – there is always a reason we can justify any market movement. But underlying all reasoning, somewhere we are always on the lookout for what are potential and very real ‘fear factors’.
At times when there is fear lurking at the back of one’s mind, it is always best to stay prepared – forewarned is forearmed. Let’s take a quick look at what could probably be the ‘panic buttons’ which could push the markets downwards. These are broad triggers but working the other way.
1: Geo-political tensions: This is like a ticking time bomb and the Middle East region is indeed like a tinder box – one does not when it could light up. Iraq and Syria are simmering, camouflaging in its smoke the ongoing boil in Libya. Russia is another area of tension and that rising could have repercussions directly on oil and gas prices.
2: Crude price: This is a direct consequence of the geo-political tensions. But currently oil is not ruled by these factors alone – it is facing a challenge of oversupply. China slowing down is a direct hit on crude prices. But over the past couple of months, crude has bounced back a bit- it is up 67% from its earlier lows on hopes that supply will soon start matching demand. There is no indication anywhere about this happening but yet, crude just rebounded. Oil has always been the one reason which can make or break the market – when oil is down, markets are down and vice versa. So always best to keep a hawk eye on this one commodity.
3: Yellen and Rajan: These two chiefs of US Federal Reserve and RBI respectively would have a big impact. Rajan cutting rates and Yellen hiking it – these two pretty much rule the roost when it comes to looking out for reasons for the market movement. Yellen has indicated that we could probably see two or maybe one rate hike this year and Rajan, well, no more in the immediate few months, at least till monsoon fills up all the water stock across the country.
4: Inflation: The market does not pay all that much attention but the moment there is a sudden spike up, the next day we are sure to see the effect. When inflation is what will decide on the interest rates, surely, this economic data will be the biggest trigger. The drought’s effect is sure to be felt on the prices – veggie and fruit prices are already on the rise due to the scorching heat and rates are sure to go up in these coming months.
5: Monsoon and crop harvest: The monsoon season HAS to begin at the right time ad as predicted by IMD and Skymet, come down pouring to drown away all the tears of drought. As mentioned time and again, ultimately the crop production this season is what will be a trigger for the market.