SENSEX !!!!!!!! A word that raises the investor’s heartbeat..out of excitement and nervousness at the same time. So, here when we are talking about the nerves and excitement of Indian Stock market, let us first understand what it is and how it works.
The Sensex index is the benchmark index of the Bombay Stock Exchange (BSE) in India, and it has 30 largest and most actively traded stocks, which provide an accurate gauge of the Indian economy on BSE. The Sensex index’s composition is reviewed in June and December of every year. In 1986 Sensex was compiled initially and also it is the oldest stock in India. It is used by every analysts and investor to observe the overall growth development of particular industries and booms and bust of the Indian economy.
Indian Economy and Stock Market:
According to the International Monetary Fund (IMF) GDP in India grew rapidly between 2002 and 2007 and then stunned a bit in 2008, in stride with the global financial crisis of that year, but has been back on a strong growth rate since 2010. GDP growth in India owes much credit to the rise of the Indian middle class which stood at less than 1 per cent of the global middle class in 2000 and expectation of account by 2020 is 10 per cent. Also, consumer demand is an important driver of the middle class.
If the following facts are been read seriously, according to the experts of the field there are major factors that are haunting the Indian Stock Market near future.
5 Factors that are Haunting Indian Stock Market:
As we already discussed, the Indian stock market is risky as well as profitable. It makes the investor’s nerves up and down. If it is in high-risk, maximum profit should be earned by the traders. Mentioned below are a few reasons that are haunting in the Indian stock market:
- Lower GDP Growth in Past Six Years
GDP data the biggest factor behind the weak market sentiments that indicate the Indian economic growth which has slowed down to 5 per cent and weakest in six-year. The fifth consecutive quarter had slumped growth which despite the government’s recent announcements to help boost the economy. However, the figure is not expected and attracted the negative commentary from both brokerage firms and economists, sending shockwaves among domestic and foreign investors. Many economists urged the government to boost investments, which they said is the only way to revive the restrained economy. In the March quarter, the Indian economy expanded by 5.8 per cent. Economists in a Reuters poll had expected GDP to grow at 5.7 per cent in the June quarter.
- Core Industries Slow Down
The core industries are the other industries in which the stock market can be traced back to the release of official core sector data. As per official data, the growth of eight core industries dropped to 2.1 per cent in July due to a contraction in coal, crude oil, natural gas, and refinery products. Similarly, the combined growth of the eight core industries was at 7.3 per cent. Meanwhile, Nikkei Manufacturing Purchasing Managers’ Index INPMI ECI, conducted by IHS Markit, showed that India’s manufacturing sector hit its lowest mark in August at a 15-month low. August of this month, manufacturing activity in India slumped to a 15 month low sales, forcing factories to cut back on production, a private survey showed, while separately released government numbers showed muted output rise in the infrastructure sector in July.
- Rupee Hits 72 Per Dollar Mark
One more sentiment of the stock market has also been affected by the rupee’s freefall. The Indian currency fell sharply to go beyond the 72 per dollar mark again. A mixture of weak macro data and strengthening of the US dollar has dented the rupee’s value. The stock market shows the negative impact on the rupee’s woe as investors rushed to pull out capital. The extension of Indian rupee has losses and trading at day’s low level at 72.02 per dollar, with domestic equity market ended lower with Nifty below 11,850 level. On November 11, the rupee tumbled by 19 paise to a near one-month low at 71.46 against the US dollar after fresh concerns over US-China trade deal and Hong Kong unrest kept forex market participants edgy
4. Foreign Institutional Investors (FII) Outflow
In Indian Equity market another highest brunt capital outflow is FII. Both domestic and foreign portfolio investors (FPIs) have been spooked after the release of official GDP data. Since August 23, continued their selling spree, withdrawing close to Rs 5,500 crore from the Indian equity market. In the equity market, the foreign investors had pulled out to closing of Rs 3,000 crore. In July of this year, the Foreign investors have pulled out over $2 billion from Indian stock market and the highest outflows seen by an emerging market during the month, as the concerns around higher taxation on FPIs and continued economic slowdown has forced them to reallocate to greener pastures for the near term.
- Auto, Bank Stocks Down
This is the last reason that haunted the Indian stock market, the automobile and banking stocks that have also give a contribution to the weak market sentiments. In the last 10 months, the automobile sectors have the worst slowdown in the stock market, most of the stock of automakers are trading in the red. A major slowdown in the auto sector which triggered the sales number in August. Stocks of Tata Motors, Maruti Suzuki, Eicher Motors, Mahindra & Mahindra and Ashok Leyland are all trading in the red. Meanwhile, banking stocks also plunged significantly after Nirmala Sitharaman had announced the merger of 10 PSBs into four entities. Shares of Punjab National Bank (PNB), Indian Bank, Oriental Bank of Commerce and Canara Bank fell sharply.
Despite the fact that the above-mentioned reasons are haunting in the Indian stock market and slowdown the stocks which are being traded, the investors are investing in it to earn a profit after taking the major risk of loss. This represents the basic nature of stock markets, ‘The Show Must Go On”. The one who can bear the risk of loss is the only one to which the profit belongs to.
