WHY THE MARKETS FELL TODAY?

By Ruma Dubey

The BSE today ended 440 points down, at one point going down almost 500 points at 31100.80. some 569 stocks advanced and 1972 stock declined .

The moods are somber and the spring to the feet is now heavier. There is an air of uncertainty and no one really knows where the markets are headed. After the unbridled one way ride up, the market seems to have woken up and is now rushing down towards reality.

There are quite a few reasons why the markets are down. We list down a few:

1: FIIs are big sellers.

In fact this has been happening since last month, despite which markets were closing in the green. In August they sold stocks worth almost $2 billion and yesterday, they sold stocks worth $293 million. In the entire month of September so far, they have sold to the tune of $1.07 billion.

Why are they exiting? Actually they are exiting from equity while debt is seeing more buying. So they are not quitting India but just equity for now as the perception is that the economy is slowing down and given the macro data, among the emerging markets, most feel India is overvalued.

Also they are getting ready for the balance sheet trimming and rate hike by US Fed in the coming two months. Dollar has been appreciating thus giving them enough reasons to offload Indian equity.

2: Worrying macro picture

The economy is slowing down and the Govt needs to act really fast. There is no denying the fact that demonetization and GST are leaving a trail of disaster behind and the Govt will have to work on clearing the debris soon. The Q1FY18 earnings season has not been good and it is expected that Q2 could be worse. Thus immediately on the macro front, there is really no trigger as such apart from the expected rate cut from RBI on 4th Oct. At this juncture, thankfully, most have learnt that even if a rate cut comes, that alone would not help the sputtering economy.

3: Oil and rupee

Oil is on the rise and rupee vis-à-vis the dollar saw depreciation. Every time oil rises, it is indeed a cause of concern for us as we import oil and it has a cascading effect on prices all around, leading to increase in inflation. It is not yet boiling but there is a sense of unease on the oil front.

4: North Korea and US rhetorics

The ongoing battel of words between North Korea and USA has left the world uneasy. Both the chiefs are not exactly known for their logical thinking thus one does not know where this will head. No one is yet talking about a war but the fear lurks which explains why gold, the safest hedge against such uncertain times is at a high.

5: Lower kharif output

Contrary to what the IMD has been saying, rains have been deficient and this has affected the kharif crops, which is expected to be lower than last year, with the only exception being sugarcane. Production of foodgrains such as rice, pulses and coarse cereals is likely at 134.7 million tonnes in 2017-18, about 2.8% below last year’s record crop of 138.5 million tonnes, ministry estimates showed. Production of oilseeds is likely to fall by 7.7%, from 22.4 million tonnes. Production of cotton is estimated to fall from 33 million bales (one bale equals 170 kg) last year to 32.3 million tonnes. Lower kharif crop means it could affect rural consumption, in the rain deficient regions.