The Indian stock market is facing a steep crash today, with Sensex and Nifty 50 falling by more than 1%. Sensex has fallen by nearly 1200 points to 76,166, while the Nifty 50 has fallen to a daily low of 23,845. Let’s discuss what’s behind the market plunge, and what you should know before investing.
Why Is The Indian Stock Market Crashing?
One major factor behind the stock market dip is the dimming hopes of US-Iran peace talks. Both countries have failed to reach an agreements, and chances of re-escalation are high. The tension at the Strait Of Hormuz has led to a surge in oil prices, which have climbed to more than $100 a barrel. India imports 85%-90% of its oil requirements, and the price surge may be kicking in. Some reports claim that a fuel price hike would be “inevitable.” Rising fuel prices are likely to pose challenging for the Indian stock market.
Prime Minister Narendra Modi also appealed to the people to take Covid-19-like measures to navigate the ongoing crisis. In a recent speech, Modi asked people to re-engage work-from-home practices, reduce unnecessary travel, cut edible oil consumption and reduce dependence on imported chemical fertilizers. The Prime Minister also asked people to reduce gold purchases.
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According to VK Vijayakumar, Chief Investment Strategist, Geojit Investments, Modi’s speech may have impacted the stock market more than any other factor. Vijayakumar stated, “Such a call has negative implications for economic growth and, consequently, for corporate earnings as well. That, in my view, is affecting the market more than the geopolitical uncertainty surrounding Iran.“
Is it A Good Time To Buy?
Buying the dip is a popular investment strategy where you take long positions when markets are down and sell when it goes up. While the current dip could be an attractive entry point, there is a possibility that it could go down further. The rupee has been struggling to maintain momentum, and could see further dips. The falling rupee could present further challenges to oil procurement, which could affect the stock market further.
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