Why Is The Stock Markets Falling In India: Two Important Reasons.
Stocks markets in India are experiencing a downward trend in December. On December 6, Monday, NIFTY 50 has fallen by 284.40 points and SENSEX has fallen by 949.32 points, which has worried investors today and for the upcoming weeks.
The most important reason, because the stocks markets in India are falling, is the new Covid variant named Omicron. In India, a total of 21 cases have been detected that were infected from the Omicron Covid variant, and on Sunday, December 5, a total of 17 fresh cases were reported from Delhi, Maharashtra, and Rajasthan. So, Indian investors are much worried about the inception of another wave from the new variant. The earlier delta variant has already affected the Indian stocks markets largely. During the first two waves, major manufacturing activities were hampered, profits of the companies drowned. Sectors like automobile, real estate, constructions, infra have plunged.
On the other hand, pharma, and IT stocks have gained. In that situation, Indian investors are concerned that if a new Covid variant again surges in the country, affecting the companies.
So, the stock indexes fell significantly today. However, India has reported 8,306 new Covid cases yesterday, and the active cases are 98,416 now. This is the lowest contamination rate in the last 552 days, according to the health and family welfare ministry. So, equity investors are struggling for clarity, should they think the pandemic is under control, or will the Omicron rise as a big threat?
The second reason behind this fall is inflation. Indian central bank, the RBI is having its Monetary Policy Committee (MPC) meeting today. The MPC on December 8, will declare its monetary policy, and how are they thinking about the high inflation rate in the country. Surging inflation will drag down customers’ purchasing capacity, which will be a stress for the companies. India’s present CPI inflation is 4.48%, and the headline inflation in the US is above 65, which is the highest in the last 30 years.
Hence, the rising inflation rate is concerning investors more, according to analysts. Commenting on inflationary pressures and bearish trend of the stock markets, Nikhil Kamath, co-founder of Zerodha told English news daily Mint, “Fear surrounding the new variant may lead to travel restrictions and lockdowns,
which can, in turn, reduce oil demand, thereby cooling off inflationary pressures to some extent. The biggest risk to the markets according to me isn’t this but inflation. I believe it’s best to stay defensive until a clear trend emerges.” He also believes that during the pandemic many stocks have gained significantly, and “Omicron alone can erase all those gains”.