Why is the Indian Market falling..

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Written By Sujit Guha

I am a IT professional managing corporate financial governance with keen intrest in market

The Indian Market continued to fall and Nifty 50 lost about 300 points and NSE sinking to 1000 points. Everyone is wondering what the reason for this fall is. Is this because of the Hindenburg report or something else.

What we see that for last couple of weeks the market did not move beyond 18200 and that is for index funds. What about individual stocks? Well, the Midcap 50 has also had big fall. Let’s look at the reasons one by one.

1) Budget 2023:

The market is expecting that the government will continue with its infrastructure spending and will attract more funds from private sector.

When the market expectations are not met, we see the market fall. And this budget will be no exception. One of the buzzwords this year is fiscal deficit (Click here to understand fiscal deficit). If the fiscal deficit is not consolidated, then the market will not like it. There are some analysts feel that the fiscal deficit will be 5.9 percent of GDP (Gross Domestic Product) in FY24 against 6.4 percent for FY23. So, they expect our growth to be slower than last year.

2) Big Boys fall:

Post Hedenberg report Adani Port and Adani Enterprises continued their free fall. Infact in today’s update Hindenburg has dared Adani Enterprises to file a case in American court. The stocks were down 12 and 7 percent down today.

Big banks like HDFC Bank, SBI and Reliance industries were trading 2 – 5 percent lower.

3) UN cuts India’s 2023 growth forecast by 20 basis points.

UN feels due to lower demand due to recessions in major countries and effect of tighter monitory policies they forecast India’s GDP to be 5.8 percent. Which is even lower to the estimates of market analysts.

Though UN feels our demand will remain strong, but the GDP will be lower from 6.4 percent previously forecasted.

4) FII Selling

Market sentiments are further dampened due to Foreign Institutional Investor (FII) selling and investing in new emerging markets. Till date FII have $1.61 billion in stocks. Already Financials and IT have faced the brunt of this selling followed by consumer services, Oil & Gas, telecommunications and autos.

5) Fed Worries

The US economy expanded at a 2.9 percent annual pace from october through December, which was better than expected. This indicated the FED will remain hawkish for a long period of time.

The next FED decision is scheduled for February 1, 2023, coinciding with India’s budget.

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