What do you think is going on? Is it just the relentless exit of FII that drives this market down from its ascent last November-December? Has it completely changed in terms of short-term flow?
Currently, FIIs are selling due to year-end pressure for funds and giving money back to investors, which has been compounded by the deleveraging issue due to the rate hikes indicated in 2022. Everyone seems in a hurry to take the money. markets and this is the reason why the fall is so strong and accelerated. Although it is known that in 2022 the rate hike will not be more than twice and at the same time it will not be super unpredictable.
The second part of this decline which is more local than global is the fact that most of the traders who are caught on the long side of the layout are being held to pay market value due to the sharp drop in some of the major stocks and that this is where the problem accelerated. It could be a short-lived affair, maybe a mark to market type of thing once it’s over and the pressure eases I think the market might stabilize. So far, this week is relatively shorter in terms of trading. All in all, this is where we see the start of weaker pressure, which is largely technical in nature and has nothing to do with fundamentals. The fundamentals remain overwhelmingly positive for the corporate sector, for the economy and the outlook for the corporate sector in India remains the same.
Do you think the markets are trying to factor in a fear of global growth and because of what is happening with global liquidity bond yields, energy prices are skyrocketing and margins are affected? Do you think this is what the markets are trying to fix in the short term?
This is true, but the world economy is also trying to stabilize on one side. The good news is that with higher inflation, the result is higher growth in the global economy. That’s a good thing and the global economy is showing signs of growing after spending that kind of stimulus money.
The inflation outlook given by the Fed is not very worrying. At the same time, oil prices should not soar because world leaders are sitting opposite to solve the problem of oil production. the outlook may appear relatively more volatile, but for the fiscal year starting next year, the outlook is apparently more stable than not. This kind of turbulence is inevitable when everyone is on the long side of the market and it makes the problem worse.