The benchmark indices of the Indian stock market once again closed in the red mark on Thursday, January 20. The BSE Sensex has lost more than 1,800 points in the last three days. On Thursday, the Sensex was down 634.2 points, or 1.1 per cent, at 59,464.6, while the Nifty closed down 181.4 points, or 1.0 per cent, at 17,757.
This fall in the Indian stock markets has come at a time when other Asian stock markets, led by China, are witnessing a boom. China is going to ease some restrictions imposed on its real estate developers, which can help the crumbling real estate sector there. Due to this, trading is being seen in a big way in all Asian stock markets including China.
However, despite this, the Indian stock market remained in the red mark. Even after the recent correction in US stock futures, the effect of a bullish start to the day was not visible on the Indian market.
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Vinod Nair, Head of Research, Geojit Financial Services, said, “Inflation concerns on the global level and possible hike by the US Reserve Bank acted as major deterrents for the domestic market for the third consecutive day.”
Let us know what were the main reasons behind today’s decline in the stock market-
1. Increase in Bond Yield
This week’s sharp jump in global government bond yields, led by US Treasury bonds, has left investors accustomed to ample liquidity still pushing up stock prices.
Dealers said the rise in bond yields has forced investors to re-examine their growth projections and shift money to less risky assets.
The US Federal Reserve is expected to raise interest rates three times in 2022. The first hike is expected in March. This has led to an increase in bond yields.
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2. Selling by Foreign Investors (FPIs)
Rising global bond yields and market volatility have forced foreign portfolio investors (FPIs) to reduce their exposure to high valuation markets like India.
After a break for a few days in the first week of January, foreign investors have once again intensified the selling of shares. Foreign Portfolio Investors (FPIs) have been net sellers during the last 5 trading sessions. Dealers say the same aspect would have worked on January 20 as well.
3. Omicron Dangers
In cities like Mumbai and Delhi, there has been a slight decline in the cases of corona virus for the last one day. However, the figures of corona at the national level still remain very high.
In the last 24 hours, more than 3 lakh corona cases have been confirmed in the country, which is the highest figure since May 2021.
The rise in corona cases is an indication that the restrictions imposed by the state governments to prevent the spread of the virus will continue for some time and may hinder economic activity in the short-term.
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4. Weak Earnings
This is the season for companies to release their financial results for the December quarter. Barring a couple of cases, there is no major reason for investors to be happy with the performance of the companies so far.
According to analysts, companies that have released their results so far have either lived up to the expectations or missed some of the better estimates.
If this trend continues, brokerage firms may be forced to reduce their earnings expectations for the new financial year. This can affect the performance of the shares of the companies.
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