The India market is witnessing a deep correction, but it is not isolated in this pain, most of its Asian peers are also falling. So what has led to this fall?
All global and emerging markets are falling and some have taken a harder hit than India also.
Analysts say that the fall essentially started off with Fed Chairman Bernanke' statements about rising inflation and continued rise in interest rates. This has spooked all markets through and through.
The consensus is that US is basically going to enter an area of stagflation (which is a combination of no growth and rising) and that is basically what is causing the hit on the markets.
Kospi has taken the biggest hit today, it was closed for a holiday yesterday, and is witnessing massive selling.
Asian stocks, as a whole are down to their three-month lows, after these statements from Bernanke. If one looks at the leading stocks across Asia such as Sony, Samsung, they have also lost significantly. These are primarily exporters that are losing on fears of currency fluctuations.
The Morgan Stanley Capital International Asia Pacific Indices, a couple of hours ago, were at 1.5 per cent, which is lowest since March 8. These are pretty big Indices, which leading fund houses and investors benchmark against the Morgan Stanley Composite Index.
Nine of the 10 Indices industry groups had slid in this intra-day trade. Across the board, Kospi slid, China was down over 5 per cent. The prime concern in China will be a demand constraint given the number of share sells. Mining share such as BHP Billiton has also taken a hit.
If one compares how these Indices have fallen and the savage fall that they have had benchmarked against the 1997 and 2001 correction, it is interesting to note that all emerging markets have shown recovery between 80-150 per cent in the 12 months.
One will have to wait and see, whether these prelude to possibly another bull run. But Morgan Stanley apparently seems to think otherwise.
Speaking on the local perspective, Rajesh Jain of Pranav Securities says, "One cannot rule out the fact that sentiment is bruised and battered. There is not any fresh commitment coming in. People are taking up opportunistic positions. So there is little commitment left in the market. We are seeing fund flows in a wavy kind of situation."
He adds that, at this point, the problem with the market is the lack of commitment and sustained fund inflows. Buying is practically getting postponed. Sustained buying is what required to take the market out of this level.
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