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Top Reasons for Stock Market Fall

Top Reasons for Stock Market Fall

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Published by kirang gandhi
Top Reasons for Stock Market Fall Recently
Top Reasons for Stock Market Fall Recently

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Published by: kirang gandhi on Jan 20, 2011
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08/22/2012

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On 5
th
November 2010, whole India was gung-ho on India growth story which saw thebenchmark index close at a high of 21005-points on the BSE Sensex.The surge in optimism, then, was supported by a record FII inflow of $6.4 billion in thepreceding month of October, which accounted for nearly 1/4
th
of the total equity inflowsduring the year, at that time.However, that’s a past now – during the ensuing 2 months, markets have witnessed a sharpcrack from its highs on the back of concerns emanating from a combination of issues such asbank loans bribery scam, soaring inflation led by spiraling food prices, weak industrial outputdata and impending rate hike from the Reserve Bank of India.The 2145-point cut, which has seen Sensex dip below 19000-mark, was on the back of rigorous selling by investors which led index to tumble to a four-month closing low.Moreover, markets have posted its worst weekly loss in eight months led by a slump ininterest rate sensitive sectors such as real-estate and banking.Top Reasons for Stock Market Fall1) Bribe-for-Loans Scandal – We don’t want it any more!Scams, depending upon their size and nature, can have immense sentimental impact on theinvestors and capital markets; especially so if it has links from the corporate world.The infamous cross-country housing loan scam has exposed the weaknesses in lendingpractices despite RBI boasting of prudential lending norms being followed by Indian banking
 
fraternity. The bribe-for-loans scandal relates to a loan syndicator bribing lenders fromvarious state-owned banks and LIC Housing Finance to get big-ticket loans sanctioned.This act of bribery case, which unearthed nexus between the realty developers and seniormanagement of banks through loan syndicates, sent markets into tizzy in late November asnumber of banking, realty and construction shares slumped by 15-20% within a matter of fewdays.2) Weak Industrial Growth – Providing a reality check!As if there was no dearth of negative news flow, the industrial output data for the month of November plunged to an 18-month low of 2.7% – compared with 11.3% for the same monthof last year – on the back of unseasonal rains and working day loss during couple of monthsbefore the year end.Industry analysts are attributing this softness in industrial numbers to moderation of demandand sluggishness in certain sectors like wood products, mining and electricity andmanufacturing sector which logged in a growth of just 2.3%, as against 12.3% in Nov’09.3) Spiraling Inflationary Pressures – Government already given up!The UPA government has almost given-up in terms of its ability to tame accelerating foodinflation at a time when highly seasonable green-pees are sold at Rs.25 per kg as againstonion prices of over Rs.45 per kilogram.No, I am not going to further propagate the highly-publicized onion prices in this article.We’ve had enough of rumblings surrounding the onions prices, by now. Let me get back tothe core inflation. India’s annual rate of inflation based on WPI rose to 8.43% in December, asagainst 7.48% in the previous month.The index for fuel and manufactured products rose by 1% and 0.4% respectively. Well, even if I don’t wish to touch the sensitive issue on food inflation, just see this how I am beingdragged to cover this very same topic again – the index of primary articles surged by 3.5% inDecember and that for food products rose the fastest at 3.7% during the month.4) Rate Hike Fears – Your EMIs could Rise further!Oh! Yes… you might still gain if you’ve excess cash-on-hand which may fetch you extrainterest on your fixed deposit investments. But, it could be a nightmare for you, if you’re oneof those home loan borrowers – as RBI is likely to hike key interest rates in its policy reviewon January 25.However, market pundits are divided on whether the hike to be announced by the RBI wouldbe 25 bps or 50 bps. After the recent weak IIP data, analysts are betting on a more subdued

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