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Why is the stock market falling?2 min read

May 13, 2022


Why is the stock market falling?2 min read

Did you know that Nifty and Sensex hit a 2-month low? 

The market has lately not been a source of good news, with the Nifty falling below 16,000 and the Sensex below 53,000. 

But remember, a dip is not always a bad thing! There are always opportunities to buy and sell, even when the market is in the red.  But more on that later.

So…what happened?

Last week, the Indian stock market was hit by the surprise rate hike by the Reserve Bank of India (RBI), which came hours before the US Federal Reserve raised interest rates.

It’s not just the Indian market, but the global market, too that is having a rough time. In the US market, the S&P 500 is down more than 17% since the start of the year.

Let’s take a look at the major factors that moved the domestic market this week: 

Surprise interest-rate hike by the RBI: On Wednesday May 4th, the RBI raised the repo rate by 40 bps to 4.40%, in order to contain inflation. This was the first repo rate hike by the central bank since August 2018. 

The surprise move came after an off-cycle meeting of the Monetary Policy Committee. The RBI also raised the cash reserve ratio (CRR) by 50 bps.

Hours after the RBI’s decision, the Federal Reserve raised interest rates by 50 bps, or half a percentage.

Repo rate is the rate at which the central bank of a country lends money to commercial banks.

Foreign fund outflows: Foreign portfolio investors (FPIs) pulled out Rs 17,144 crore in April, due to fears of a rate hike by the Federal Reserve. This was the seventh month in a row that FPIs were net sellers, according to a report by PTI. 

Ukraine war: Russia’s invasion of Ukraine continues to cause volatility in the markets. Inflation has risen after the crisis began in late February, and the rising costs continue to impact countries across the world. 

– Muted corporate earnings, too, caused a dent in investor sentiment.

Markets will inevitably go through ups and downs. Even when markets are correcting, there are investment opportunities. 

So do your research and make investment decisions that work best for your portfolio. 

Do you want a few suggestions on handling volatile markets? Read our blog to find out more.


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