Markets crashed today again – All you need to know

Its been a while when we saw Indian benchmark indices in a buoyant mood. Today, it was another day of carnage out there. Sensex was down by 1189.73 points i.e., 2.09%. It was closed at 55,822.01. On the other hand, Nifty fell by 371 points i.e., 2.18%. It was closed at 16,614.2. Well, then what’s the reason behind this? Let us see, one by one.

First of all, this is not a pure Indian phenomenon. Lately, the world markets have been seeing correction. From Asian markets to the US, equity market has been on a sell mode. There are multiple reasons for this which are inter-related. In the West, the virus threat has been showing its impact on market as the cases are increasing significantly. The fear of closing down of economy in the name of lockdowns causing markets to spook.

Another major reason being the signals from various central banks on tightening the excess liquidity in the markets. They had already been took some steps towards this. In India too, RBI has anounced its operations to control the liquidity. This made the bond yields to rise. In US, the Federal Reserve has been keen on controling the liquidity. It want to complete the process as soon as possible.

But in India, the major reason is the FIIs’ selling trend. FIIs have been selling for a while and it continued today also. Almost all sectoral indices have been witnessing massive correction. Two months ago, we used to see Nifty 50 at 18,300 levels. But now it is around 16,610. It is almost a 2,000 points correction in two months. Back then, the higher valuations caused concerns over Indian equity markets. Several global investment banks have reduced Indian markets rating to underweight. And now the correction reached another level.

Conclusion: Higher valuations, technical factors, virus threats, fear of lockdowns and worries over rate increase, all these factors have been cumulatively leading the global equity markets in a bearish trend.