Why are the Markets Extending Losses ?

The Indian Markets are constantly seen in the red zone since the last 2 weeks. The Nifty index has come down to 17000 levels from 18200 levels in a short span of time. This has been due to the major effect caused by multiple U.S. Bank failures. The markets are responding to the fear caused in the financial system of the United States. The markets have bled heavily in the last 2 weeks and this is also because of the weekly expiry and lack of confidence of retailers in the Banking segment.

Market Blows

The first blow that caused the markets to reverse their gains was the failure of Silicon Valley bank. It was one of the major banks in the U.S and handled a huge customer base of Tech Startups, Crypto Startups and VCs. The company’s failure caused a major havoc in the financial system of America. It was the biggest bank to fail since the 2008 Crisis. The reason behind this was the announcement made by the bank which said it needed additional 2.25 Billion dollars to shore up the balance sheet. Other banks following the SVB were Signature Bank and Silvergate Bank. Both of them had heavy exposure to Crypto companies. They were the main banks for the crypto companies. Following this news the Dow Jones fell heavily causing a direct impact on the Indian Markets.

Market Sentiment

The Indian market had just recovered from the sudden allegations placed on the Adani Group. The group was accused of manipulation of stock prices, illegal offshore accounts, Multiple shell companies to turn around money and many more. This was done by the Hindenburg group and hence the markets fell heavily as Adani Group has recently got many projects which need heavy financing and hence the markets reacted to this news. However the markets have just stabilized and then the US bank failure disrupted the entire market flow. 

The volatility in the markets was noticed even on the Expiry of 16th March. The Indices were extremely volatile. If we consider bank Nifty alone then the index was giving 200 to 300 points of swing in a span of 30 minutes. This was supported by the Nifty50 index as well. The indices were constantly posting gains and losses in a short time period. However the better news for the markets was the end up of both these indices in the green zone.

Other Information

Another reason for the liquidity crunch faced in the market is the constant flow of SME IPO. The markets are witnessing huge inflow of SME IPOs and retailers have been lured towards them due to the recent successful launch of the multiple SME IPOs. They were giving out nearly 30 to 60% return on listing day and hence the retailers are invested heavily into the markets which is coming in the way of a rapid market recovery.

Market Segments

The most losses were reported into the I.T sector and the Metal sector. Major I.T companies like TCS, Infosys, Wipro, Tech Mahindra had faced huge losses in this market fall and are again ripe for fresh averaging or investment. The Indian markets are in such a zone where a quick recovery could be expected very soon. However one needs to hold their investments in such a volatile market. The major reason for being bullish about the markets is that the markets are not having any major bad news for the Indian domain since the Adani News. Hence one can expect a good recovery once the US bank scenario calms down. Also there were rumors about Russia and Ukraine war taking a new turn with Putin fearing a nuclear war. Hence this could be a major point to look over before going long on your investments.

Current Technique to Follow

The investors need to be tension free as their returns are going to push in in the long term and definitely by the end of this year. However traders need to strictly follow the stop loss strategy. The Option traders should be cautious due to a high volatility and can risk their stop losses with a constant watch on their positions. The reason is that such high volatility may hit your stop losses and then again move away which may cause over trading scenarios. Hence one should trade less and aim for a bigger percentage gain while trading in options. 

Currently though the Banking sector is seen falling heavily one can watch for fresh investments in this area. The reason is the quick recovery expectation in the bank Nifty and the Indian banks posting a good result in the previous quarter. Also with failure in the US Banks the money needs to flow somewhere which opens business opportunities for our banking sector. Hence trade less, invest more and keep a constant watch to get away from the loss trap. 

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