MARKET ROUT – STAY ROOTED!
By Ruma Dubey
What a day this is turning out to be!
We were ensconced in a happy mood after the Indian markets recovered smartly yesterday; thinking that we could see some better times if not great times ahead. We knew volatility will now remain a constant factor but no one was prepared for this big a fall.
With the rumblings rolling in USA, what with the Dow falling over 800 points, the selloff spilled over into the Asian markets too. If we are the kind who seeks succor in others-going-through-the-same-pain-as-us, then it is really not a crisis situation. Markets around the world saw a selloff, right from Japan, Taiwan, Australia, Hong Kong, New Zealand to India.
Trump is bending backwards and as usual, mouthing rhetorics to prove that the US Fed with its increasing rate cycle is at the root of this rout and not the trade war that he unleashed. Commenting after the plunge yesterday, Trump said that the fall was not on account of the trade conflict with China. He said, “The Fed is going wild. They’re raising interest rates and it’s ridiculous. He added, “The problem in my opinion is the Fed. The Fed is going loco.” Obviously and rightly so, the Fed has chosen to ignore these comments completely.
The Indian markets moved like a yo-yo. It first fell over 100 points and recovered to show a decline of around 800 points – where it remained till around 1pm. Now it has recovered and the decline is around 450 point. The rupee too fell in the morning to Rs.74.48 levels and then it turned around to recover to Rs.74.10.
So in the morning, the panic button was pressed and now with reports coming in of the market being in an oversold position, buying in value stocks picked up and the indices recovered.
Those who are not active market participants asked a simple but very apt question, “why did the market go up yesterday? The same points which you recounted today, existed today; so what changed between today and yesterday for this rout?”
That’s the beauty of the stock market; you can come up with so many reasons for why the index rose and equal number of reasons for why it went down. And all convincing. Thus today the market crashing because US markets crashed makes sense as fear factor had crept in. And tomorrow if the market recovers into the green, we can always say that the markets were oversold and buying emerged; as we mentioned earlier in this report itself.
The thing is that with stock markets, for traders these reasons will matter a lot. But for investors, all these are mere learners and we need to remain in the know so that we can take a knowledge-based investment decision – because we know, we know that selling now makes no sense while buying in some quality stocks makes perfect logical sense.
As we mentioned earlier too, the volatility will remain. There are indeed many global uncertainties along with domestic macro issues.
Just as we say time and again, if you are there for the long haul, stay out. There is really no reason for long term investors to panic as India’s long term story remains good.
Market fall and rise might have hundreds of reasons but the simple truth is that it is fundamentals and only fundamentals which rule.