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why sensex is off today The Latest Trends 2021

 

why sensex is off today The Latest Trends 2021

The Sensex in numbers

Sensex The Sensex is the gauge of the Bombay Stock Exchange. 42,600.05 points The Sensex came into existence on October 4, 1986 As of January 2017, it has a market capitalization of Rs.1,25,169.50 crores. 

The Sensex represents a capitalization-weighted index. It is designed to track the performance of the stocks that make up the BSE 500 index. The first index issue was made on January 5, 1994, The index is one of the world's longest-running stock indices. 

MSCI India and FTSE Russell have been added to the BSE EM index since October 2, 2017. "Nifty index has been included in MSCI Emerging Markets index on September 14, 2017," the BSE said. "Benchmark indices like Sensex and Nifty is driven by the flow of money, primarily from mutual funds and FPIs.

 

What caused the fall?

Covid Law Offices is a company that offers legal support for tax litigation. Covid Law Offices has been involved in certain high-profile disputes, which is largely responsible for its rapid growth in recent times. However, investors fear that they might lose these high-profile cases. Furthermore, its fees are expensive. 

Investors are worried that Covid Law Offices might struggle to pay the legal fees for these pending cases. As of February 2018, Covid Law Offices held 12,549 cases which were more than any other law firm in India. 

The firm booked revenue of Rs 69.9 crore during the same period. So, there's an immediate risk that a chunk of its legal expenses might not be paid, as these high-profile cases come up for decision. These fears are driving investors away from the firm.

 

What does this mean for India's economy?

The rise in the number of private loans fraud cases as a result of demonetization led to uncertainty over a possible slowdown in economic activity in India. 

This uncertainty led to a selloff in stocks that benefit from rising economic activity (i.e. bank stocks) and led to short-term cash strain in the system, while it also resulted in a selloff in stocks that benefit from lower economic activity (i.e. stocks with a lot of exposure to the real estate sector). 

However, the chart below shows that the concerns regarding the impact of demonetization has abated over the last couple of months. It is also worth noting that global factors, such as the concerns regarding a possible interest rate hike by the US Federal Reserve, has also weighed on India's markets in the last couple of days.

 

What should you do?

The impact of the latest event on the markets and the economy is limited. The economic fallout will be small. And the macroeconomic situation is strong. In addition, recent events have not been such that they raise the threat of a sudden meltdown. 

The latest losses should not be taken as signs of a downturn, even though they are unusual. The Sensex has been lower than its current level of 47,949 only twice since the 2009 global financial crisis. And in both instances, it has recovered to get back to its current level within just a few days. 

The recent selloff has not resulted in many redemptions from equity funds, which is a good sign for the long-term health of the equity market.

 

Conclusion

The mood seems negative as fears linger on that the annual rise in charges against the subscribers of WhatsApp will halt the economic growth of the country. 

The selloff is expected to continue as doubts continue to grow over the trustworthiness of Indian markets and the strength of the economy. Moreover, now the derivative market will have to take a cue from the Sensex and will also likely fall due to its inherent linkages with the same.

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