Market bloodbath: 5 reasons why investors lost Rs 20 lakh crore in 5 days
According to estimates, stock market investors lost more than Rs 9 lakh crore at the end of trading on Monday alone
Sensex nosedived by 1550 points at the end of the day's trading on Monday. Nifty 50 too saw a decline of 468 points. According to estimates, stock market investors lost more than Rs 9 lakh crore in a single day.
To note, Sensex has shed more than 3800 points in the last five days. National Stock Exchange's major index Nifty has seen a decline of 1159 points in the same period. Market investors have lost Rs 20 lakh crore in five days. Let us tell you about the five reasons due to which investors have suffered such huge losses.
* Global market decline
The fall in the global equity market amid concerns over a hike in interest rates by the US Federal Reserve has seen a sell-off across the globe. The US central bank will hold its next policy meeting on January 25-26. Analysts expect strong but slow growth, high inflation and accelerated Fed policy normalization in 2022. US stock indexes had their worst week in two years on January 21 on prospects of higher interest rates.
* Decline in tech shares
In the last few months, new firms getting listed in the stock market at high value have dampened investor sentiments. Retail and high net worth investors bet big on these stocks, but the prospect of multiple rate hikes by the Fed this year has spoiled the sentiment. The tech sector is also under pressure globally, especially in the US.
In India, shares of One97 Communications, Paytm, CarTrade, PB Fintech, and Fino Payments Bank have slipped between 10 and 50 per cent from their listing prices. Zomato and Nykaa parent FSN e-commerce have fallen 21 per cent from their highest level since listing on the stock exchanges in 2021.
* Effect of third wave of Covid-19
Several states have announced or expanded restrictions. According to analysts, economic activities may be hampered in the coming days.
* Earnings slump from rising costs
Early trends in this earnings season indicate that higher input costs remain a concern. There is a moderation in profit margins. Even though the earnings have been in line with most estimates. According to analysts, an increase in Covid-19 cases and a rise in crude oil prices means that profit margins will remain under pressure in the current quarter as well.
* No increase in demand
Another reason for the decline in the market is the demand not increasing. There was no boost as expected from the festive season. Rising inflation, delay in the harvesting of Kharif (monsoon) crop due to unseasonal rains, and remnants of the second Covid wave have impacted demand during the third quarter (October-December).