Why market fall today: Thursday was a disappointing day for those investing in the stock market. The tremendous growth that was being seen in the market for the last five consecutive trading sessions has suddenly come to a halt. Reaching the day’s low, the Sensex fell by almost 1,000 points to 76,558. At the same time, Nifty also dropped by 255 points and slipped below the level of 23,740 by 3 pm. This sudden decline in the market has increased the concern of common investors, whose portfolios came into the red in the blink of an eye. While big stocks like Infosys, HCL Tech, L&T and UltraTech Cement fell by up to 2%, the Nifty IT index also fell by around 1%. After all, what are the reasons that suddenly spoiled the mood of the market?
Danger looming on peace agreement
The first and most important reason for this big fall in the market is the weakening of hopes for a ceasefire between Iran and America. When the news of peace agreement between the two countries came, markets around the world heaved a sigh of relief. But now the situation seems to be complicated again. Iran has alleged that both America and Israel have violated the terms of the agreement. Israel’s campaign against Hezbollah in Lebanon is still continuing. Due to this, the Strait of Hormuz, which was about to open for trade, is still completely closed to ships. At the same time, US President Donald Trump has said in a warning tone that if the agreement is not followed, the US Army is fully prepared for action.
Crude oil fire again
The second major reason for the fall of the stock market is the sudden rise in the prices of crude oil. Crude oil, which had fallen from $110 to below $95 per barrel after the initial news of the ceasefire, is now gaining momentum again. Due to lack of tension in the Middle East, Brent crude has jumped 2% to $ 96.70 and WTI crude has increased 3% to $ 97 per barrel.
The third reason is the weakening of global markets. Markets all over the world are under pressure due to doubts over the peace agreement. Japan’s Nikkei, Hong Kong’s Hang Seng, South Korea’s Kospi and China’s Shanghai Composite, all of them closed in the red. The futures trading of the American market (Dow Jones futures) are also indicating a decline.
Continuous selling by foreign investors
The fourth major reason is the continuous selling by foreign institutional investors (FIIs). Foreign investors have been selling their shares continuously for the last 26 sessions on Dalal Street. On Wednesday alone he sold shares worth about Rs 2,812 crore. Although domestic institutional investors are buying, such withdrawal of money by foreign investors depresses the morale of the market.
The fifth reason is the weakness of the Indian rupee. After a good recovery in the last few days, the rupee weakened by 16 paise to 92.70 against the US dollar in early trade on Thursday. After the huge fall in March, the Reserve Bank of India (RBI) had tried to control the rupee by taking some strict steps, but it seems to be softening again in front of global pressure.
‘Profit-booking’ after profits
The sixth and final reason for the market’s decline is profit-booking by investors. In just five days of the beginning of April, there was a spectacular rise of more than 5,600 points (about 8%) in the Sensex. When the market reaches high levels, investors start selling shares to secure their profits, which is called ‘profit booking’.
According to VK Vijayakumar, Chief Investment Strategist, Geojit Investments, if the ceasefire in the Middle East continues, the market will remain bullish. But if the peace agreement is cancelled, crude oil prices may rise further which will be dangerous for the market. However, he also says that the shares of good companies, which are now cheap due to selling, can bounce back any time. In such an uncertain environment, it is wise for investors to remain patient instead of selling shares in a hurry.
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