Market’s reaction on 23rd May, 2019 underpins the flabbergasting nature of equity markets.
India’s benchmark indexes witnessed it’s worst intra-day fall in 11 years. None of the stock market pundits have predicted it and hence have little explanation to the drama.
Here are some of the probable reasons behind the mysterious reaction of our beloved equity markets:
- Profit Booking – Believe it or not, Modi 2.0 was inevitable, & the traders were already long on their positions in anticipation. Traders used the early morning surge to close off their open positions, resulting in heavy profit booking.
- Suprise – Having witnessed demons likes DeMo in the previous NDA government, it won’t be surprising if the stock market has already got a smell of something similar.
- Streched Valuation – Nifty50 is already hovering around P/E of 29 times, which doesn’t leave much scope for appreciation unless there is a substantial surge in the underlying earnings.
- A not equal to B – Political stability doesn’t imply economic certainty, if that were the case Russia would have been the most stable and certain economy. Economic problems still persists in India Inc. i.e. crisis around NBFCs, slowdown in industrial activity and rural spending’s lackluster growth. Political stability is one of the factors behind an efficient economy and not a magic wand!
However, at the end no one knows the next awaiting surprise.