Is the market headed for more correction or this is it? This is the question everyone has in mind and they are looking for cues to get a clear picture. The ongoing war between Russia and Ukraine has thrown the global markets on a roller coaster ride and rising inflation worldwide has caused fuel to the fire. To top it all, the interest rate hike by the US Federal Reserve have made FPIs ( Foreign Portfolio Investors) to pull out money from emerging markets and head elsewhere. Since October 2021, the Sensex has fallen almost 15% from its peak while mid and small cap indices have corrected 18% and 17% respectively. The situation is grim, and the market is pretty close to the bear phase which technically begins when there is a correction of about 20-25%.
This high volatility has rattled the faith of the investors and the expectation is that the ride going forward isn’t going to be as smooth as it was in last FY. This the year of interest rate hikes, rising inflation, tightening liquidity, dollar strengthening against Rupee and increasing crude oil prices leading to disruptions in the supply chain. The volatility is going to continue. RBI is expected to hike rates further in the coming policy review. The overall economic growth will depend on the quantum of rate hike by the central bank.
Markets falling further will depend on the economic growth going forward. Till April 2022, Indian market was least affected owing to better growth prospects vis-à-vis global markets and continues inflows by the domestic investors. The hike in repo rate in May 2022 changed things for a while and a bit of volatility is still expected for few months till global situation stabilizes but the overall investment scenario remains hopeful.
A lot of sectors have corrected significantly and offer good investment opportunities hence this time should be considered as investing more money into the already existing portfolio in a staggered manner through SIP or STPs.
In the end, markets do recover and continue their upward journey in the long term. These short term volatilities should be considered as mere noise and ignored.
