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Indian markets crash: Sensex losses due to weak global indications

The Indian market opens the week on a downward curve, started showing some indications of fatigue. On a global scenario, the major concern now is that the US Federal Reserve might over direct the economy signaling aggressive interest rate hikes in the future.

The Sensex closed 1.6percent lower and the Nifty50 with 1.8percent lower early this week. But what exactly led to it and what does it mean for you?

The industries put together have lost huge amount like 7lakh crores of rupees, which is about 85 billion dollars. This is really bad for the Indian markets. Will things get worse? The first factor, driving the plunge, is increasing dollar. The Rupees is 81.5 against every US dollars and this is the lowest level in the history of Indian currency.

During such time foreign investors prefer safety, the most. They take out their money from these markets and re invest in safer avenues in abroad. When more people seek out dollars its value also increases… Its simple logic – higher the demand, higher the price!

Tougher with other currencies as it means depreciation. For instance British pound has fallen too, Euro has gone down such not in 20 years Japanese yen never seen such devaluation since last 24 years. It’s already happening in India … foreign institutional investors have taken out nearly 2900 crores of rupees in one day alone … What does it mean for the market? All these indicators points out to –recession.

Nouriel Roubini, noted economist predicted the financial crisis in 2008, now feels the US and the rest of the world is about to face a horrible and lengthy recession.

Other agencies reflect this ruined prediction like OECD (Organization for Economic Cooperation and Development) have new reports and the vital takeaways are the global economy, expected to grow by 2023. Their 1st projection was 2.8 percent but they have slashed it by 60 points. Their euro zone is worst hit. Their GDP projected as 3.1percent and in 2023 predicted to be 0.3 percent. If that happens then some parts of Europe will have recession … within Europe, Germany is the worst affected.

What about the rest of the world? Will the recession in Europe will likely be exported elsewhere?

As for instance, US’s GDP is expected to grow 1.5 percent in 2022 but will slow down to 0.5percent in 2023. It’s not recession, but lot of economic pain though! It will be felt for rest of the world even India will feel the pinch.

The experts are continuously tracking indicators to predict recession and the status of oil prices is one of them. If the recession is around, the oil prices usually fall. Its simple logic – during recession economic activities fall whether air travel, factory work or industrial output which means demand for oil gets low.

How much are we prepared for this? Even though economic terminology can sound dull but recession can be a part of any economic cycle. It is a painful economic slowdown. Lot depends on what happens in few more months. Will America’s Federal Reserve announce more aggressive hikes? If so only planning and alertness will be the key to overcome the situation created by fewer investment, fewer jobs and fewer exports.

We should all prioritise safety phases like health and life insurances and also education budget for our children. They must be on top importance in our to-do list.

What about our spending pattern? Most likely the era of cheap credits are coming to an end. The Central Bank are trying to control spending with interest climb. All should ensure planning finances more carefully this year.