Jerome Powell: The time to make easy money is gone. Investors lost Rs 4 lakh crore within minutes of trading on Thursday. As of 11 am, the market value of companies listed on the BSE declined by Rs 4.01 lakh crore to Rs 258.77 lakh crore, from Rs 262.78 lakh crore on Tuesday.
Central Banks’ soft stance was “temporary”
Global stocks’ good valuations were partly based on the soft policy stance of central banks. It ignored the fact of persistent inflation over the past several months and the soft stance of the central banks was never considered “temporary”. This has been acknowledged in the commentary of the US Fed.
Fed chairman surprised the market
Fed Chairman Jerome Powell’s stern commentary has taken the market by surprise, raising the question of whether there will be four or five rate hikes this year. Just two days ago, the market was expecting three hikes. The strengthening of the dollar and the fear of foreign fund outflow dominated the domestic market as well. Also, ahead of the budget and state elections, traders started reducing their positions on the day of futures and options expiry.
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On the press’s query of more than four rate hikes, Powell said that the option is not closed. That is, the options of higher rate hike are open.
Bond market will continue to stir
Manish Dangi, Macro Investor & Advisor, said in a report in the Economic Times, “It is now certain that the bond market movement will continue. When economic data starts to slow down, new decisions are made, and now the Fed’s next effort is to control inflation. This set up is good for the dollar, bad for bonds, bad for equities and really bad for emerging market currencies.”
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Should investors be worried
There are two ways to look at this, said Aditya Narayanan of Edelweiss Securities. Narayan said, “First to react on a daily basis, which is happening in the case of this troubled market. Second sit and tell what are the risks for the markets from the next 6 to 12 months and how many upsides are there for the market.
It is not right to react in a hurry
“In our opinion, the market will remain volatile this year. We have a target of 18,000 on Nifty50 by the end of this year and if you see the market going down it means it is becoming attractive. If it bounces, you need to be careful. I’m not going to react by looking at it as an instant. I don’t think this year is going to be difficult.”
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