It's been long since I wrote an article. I apologize the readers for not providing updates for these days. Here on let us start. This week we could see almost a 4% downward correction in Indian indices. Not only India, but also also the global indices like Nasadaq have corrected. However Nasadaq made a mild recovery in the recent trading session. But we cannot expect that to sustain and it can fall. But in this article let us explore about the Indian markets and various factors led to the correction.
What happened this week?
Reasons behind the correction:
Firstly, due to the war the exports in our country has been highly affected. So this has led to correction in the so called 'dollar companies' or exporting companies. This was the main reason for correction in IT majors like TCS and Infosys.
Secondly, we could witness a correction in FMCG companies like HUL, ITC, Dabur. The main reason for this correction was the sales report update from Dabur. It indicates that their sales for q2 2024-25 was not good. This made the investors to expect that even other FMCG companies will also be facing the same issue. I guess that, this could be because of the heavy rains that has caused damage to the crops in some parts of the country. The other reason for this correction is due to war for the reason said above [exporting companies]. Also, there is an expectation that Israel might attack the petroleum lines in Iran. If it happens, it will increase the fuel cost in all the countries which import from them, due to the sudden shortage of fuel ⛽️. This could impact the prices of agri produce like rice, vegetables, etc., as they are being transported through fuel operated vehicles. If the prices of these necessary goods rise, then they may negatively impact these FMCG companies as people [mainly in rural region] have only limited money to spend on other items.
The increase in crude price was the reason for correction in paint and tyre companies. The crude price is expected to rise further.
Finally other main correction was witnessed with gold financiers. This was due to the instructions from the RBI. We saw a correction in companies like Manappuram, and Muthoot Finance. But it can become alright in long term.
Other sectors like automotive companies were all facing correction because of the same war reasons.
Impact due to Bank of Japan [BOJ]:-
What to do now?
Usually during such uncertain times, investors feel gold as a good option for hedging. By seeing the markets one thing which I strongly believe is, gold has the possibility to rise even further. The two main reasons are the war as I said and the other one is the rate cuts which is expected to happen once again this year end. But I request the readers to decide whether to buy or not, I'm just saying I like to invest in gold during uncertain periods. As soon as the war was announced, the VIX has surged. This shows the increase in level of uncertainty.
During times like this investors should pull back their money from momentum stocks and purchase fundamentally strong stocks at a lower price. But the 'good stock' should be analyzed and found. We could even expect an overall 10% correction in Nifty. This provides a good buying opportunity for investors.
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