Due to the recent downward trend of Nifty, many traders are wondering why Nifty is falling. Understanding market trends is essential if you wish to figure out the correct time to invest. Investing in the share market at the right time plays a crucial role in determining whether you make a profit or a loss. Without thorough research, it is impossible to trade with confidence. Getting the right information from reliable sources is crucial for those who buy and sell stocks. To get a thorough understanding of the market, you have to understand why Nifty is falling, and what are the factors responsible for it.
Why Nifty is falling
As seasoned traders know, the trends in the stock market are tied to global events. Share prices are affected by the seller supply and buyer demand, fluctuations in the economy and political climate, amongst other factors. The current natural phenomenon that has taken the world by a storm is the recent outbreak of the Corona virus. Corona virus or COVID 19 has affected more than 150 countries are territories around the globe and is continuing to spread at an alarming rate. In the manufacturing sectors of China, there was a sharp contraction of activities in February. The official reports said that it had struck the lowest recorded level, which was a powerful statement of the shattering impact the coronavirus outbreak was having on the economy. Since then, the risk of a fall in the stocks around the globe has increased.
The global stock market has experienced a sharp decline and investors are worried about the large scale economic impact the Coronavirus is continuing to have. Due to worldwide sell-off as a response to the pandemic, Indian markets are also facing the brunt. At the beginning of March, when India was relatively less affected by the virus, the intraday trading in Nifty touched a low of 11,036.25. This was an 11% correction from the all-time high levels. The Equity market indices of Sensex and Nifty both slipped from their highs at this time and closed at 0.4% lower when a couple of new cases of COVID 19 were found in India, increasing the total affected count to around 5. At present, the number of affected cases has surpassed 100, and Nifty is continuing to fall. If you subtract the 10-year bond yield from the Nifty earnings yield, the levels reached almost touch the historical Nifty bottoms.
The fears over COVID 19 have affected some industries more than others. But each sector, except IT, has seen a drop in value. PSU banking and metal stocks witnessed a 4.5% decline. In metal scrips, the fall was over 2%.
The ripple effect of the fear of COVID 19 has sent waves of shock throughout the global stock market. Almost every industry is shrouded by doubt and anxiety, and there are temporary but steep losses if one is carried away by emotions.
This could also be the perfect opportunity to buy stocks in well-performing sectors. But, you must resist the desire to buy in bulk at this point. The effects of the pandemic are continuing to expand, and we are still at an early stage. It is impossible to predict how fears over the spread of the disease will impact stock prices in the future. It’s the time to tread carefully and stay alert for any opportunity that might present itself.