This week started with a bumper rapidly in the stock market. The market had climbed 3.8 percent in one day. However, there is then the ups and downs in the market. After reaching 25,000 points, the Nifty fell below 24,500 on May 24. Then later he recovered. This ups and downs of markets confused the investors. The question in his mind is whether it is time to shop, time to book profit or it is good to stay away from the market for some time?
The real reason for more ups and downs in markets
Bond yield has been the reason for the major ups and downs in the market in the last few days. The difference between the yield between American bonds and India has decreased significantly. It is just 165 basis points. This difference is the lowest in the last decades. The question is, what is the reason for the decreasing difference between the yield? US President Donald Trump may have banned the recipe rice till July. However, it has affected the outlook of inflation in the US. Second, Moody’s has reduced the ratings of the US date. Third, due to uncertainty about the policy, central banks worldwide are selling American bonds.
For the first time in two decades, such a low difference between the yield
Due to these reasons, the yield of 10 -year government bonds in the US has increased to more than 4.5 per cent. The yield of 30 -year -old bonds is running above 5 per cent. Here, things look better in India. Inflation remains below 4 per cent. It came to 3.16 percent in April. This is the lowest in the last six years. However, the growth of core sectors has decreased. The core sector holds more than 40 per cent of India’s industrial products. This has increased the hope of decreasing interest rates. This year RBI has already reduced interest rate 50 basis points. By the end of this year, he can decrease the interest rate and 50 basis points.
Investors increased in China’s cheap shares
The decrease between American bonds and the yield of Indian bonds means that the profit of investors who have invested in India by taking loans abroad have decreased. Apart from this, increasing yield means that the prices of bonds are decreasing. In such a situation, investing in bonds compared to shares becomes attractive. Second, the negative impact of the agreement on tariffs between the US and China has also had a negative impact on the Indian stock markets. On the other hand, China is announcing other measures to support its economy. Due to this, the stocks of Chinese companies are getting more attractive by investors at a low price.
Large selling of foreign investors
This month, FII (foreign investor) invested Rs 20,000 crore in India. However, on May 20, he sold Rs 10,000 crore in a day. This was the largest selling of foreign institutional investors in any one day after February. He then sold on May 23 and selling Rs 5000 crore. This affected the market. However, the good thing is that the dollar has weakened due to uncertainty in the US. This has reduced the attraction of investment in dollars.
What should investors do now?
Now the biggest question is what the investors should do right now? The picture is not looking good in view of the conditions that are right now. FY25 continued to have lethargy in capital expenses in the private sector. The consequences of the fourth quarter of the companies have also been mixed. Analysts say the pressure on the earnings may continue. However, increasing uncertainty in the US may increase investment of foreign investors in Indian markets. This can make the market a boom in between.
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Domestic institutional investors are investing well. This will also affect the markets. Overall, it seems that the market may continue to fluctuate in the short term. In such a situation, the selection of shares will matter a lot. Long -term investors can invest on stocks of companies whose prices have come at attractive level.
Ananya Roy
(Roy Creditbull is the founder of Capital. The views expressed here are his personal views. It has no relation with this publication.)
