An erosion of Rs.16.59 lakh crore in investors' wealth

- Sensex 3426 and Nifty 1054 points down in nine trading sessions

- Market Cap Rs. 286 Lakh Crore to Rs 270 Lakh Crore today: Investors run for safety due to fear of economic slowdown amid rising interest rates

AHMEDABAD: Amid the fear that economic growth may decrease due to recession in the global economy or rising interest rates, along with the global stock market, the Indian stock market is also witnessing a continuous decline. The Indian stock market closed lower for the fourth consecutive day on Monday. Sensex fell by 954 points and Nifty by 311 points. Dt. After reaching highs of 60,571 and 18,070 in Sensex and Nifty on September 13, there is continued selling pressure. Since then, the Sensex has closed down 5.65 percent or 3426 and Nifty 5.83 percent or 1054 points in nine trading sessions. Along with this decline, a massive decline of Rs.16.59 lakh crore has been seen in the assets of investors in the stock market.

In this nine session the market cap is Rs. It was 286 lakh crores and now it has reduced to Rs.270 lakh crores. Not only the main index but the Nifty Small Cap Index fell by 8.14 percent, the Midcap Index by seven percent and the Nifty Bank Index by 6.73 percent. This shows that the sell-off is broad and not confined to any particular sector or large cap.

In the month of July-August, there was a sharp jump with buying in Indian and global stock markets on the hope that interest rates will not rise again with the indication that inflation is coming down. But in September these hopes have been dashed. Last week, the Federal Reserve raised interest rates by 0.75 percent for the third consecutive meeting. In the last 41 years, interest rates have not risen so fast in America. Now the interest rate in America has gone from 3 to 3.25 percent for the first time since 2008. Not only America but England, Norway, Sweden, Switzerland, South Africa and the European Central Bank have also had to increase the interest rate. The Reserve Bank of India has increased the interest rates three times and it is predicted that it will be increased in the meeting on September 30. During the corona period, the central banks of the world adopted the policy of cheap money and abundant money to overcome the recession. Now these two are being pulled back. Economies have emerged from recession, but supply chain disruptions and the Russia-Ukraine war have left inflation at record highs in several countries. To stop inflation now is the time when money is expensive and less liquidity in the market.

In an economy emerging from recession, recovery is fragile and there are fears that too high interest rates will derail it again. If there is a recession in the economy, if its growth slows down, there is a possibility that the earnings of the companies will be affected, there is a sell-off in the stock market. Investors are rushing to safety. In the face of rising interest rates, both cash and government bonds are bullish on the hope that returns will be safe and high. The dollar, the world's safest currency, is at a two-decade high due to a cash glut. The yield in American bonds has reached four percent. As the currency and interest rates are both high, the foreign institutions that bought Indian stocks in August have sold again and due to this, the Indian stock market is witnessing a decline.

After ten months of continuous selling from October 2021 to July 2022, foreign funds saw a purchase of Rs 22,025 crore in August and there were bright circumstances that they would now invest in the stock market and the stock numbers would touch new heights. There again in September, foreign organizations have started aggressive sales. According to the data of the exchange, including the massive sale of Rs.5,101 crore today, foreign funds have sold Rs.7,547 crore in the stock market in the current month.

As interest rates increase, money liquidity decreases, which is expected to affect people's purchases and the economy. It is also being assumed that the economy will slide into recession due to high interest rates. Due to the fear of recession, prices of various commodities are also falling. Instead of 110 dollars, crude oil is now getting the lowest level of 85 dollars per barrel in the calendar year 2022. Copper prices have fallen by 8.25 percent, aluminum by 12 percent, zinc by 17 percent in a single month.

Returning waters of the pound's empire, hit record lows against the dollar

- Rupee fell by 193 paise in four days to hit a new low of Rs.81.67

The British pound, once considered the safest currency, fell to a historic low today, with the dollar hitting new highs in the last 20 years amid rising interest rates in the US, economic recession in Europe and Britain. The pound hit its lowest level since 1971 of 1.03 against the dollar. Meanwhile, the Indian currency rupee is also witnessing a steady decline. Today, the rupee fell by 58 paise against the dollar and closed at an all-time low of 81.67. The rupee continues to depreciate against the dollar due to the economic slowdown and aggressive selling of foreign funds in the Indian stock market. In the last four sessions, the rupee has seen a massive decline of 1.93 percent against the dollar. Dt. The rupee, which was at the level of 74.96 on January 1, has recorded a decrease of 8.95 percent against the dollar so far.

As markets opened on Monday, the dollar index, which measures the value of the US dollar against six major currencies, was at a two-decade high of 114.50. Along with it, the pound was at a record low of 1.0384. The euro was above a 20-year low of 0.9618. The Japanese yen rose slightly on Friday to hit a 34-year low of 0.9612. Investors turned to the DOT, the world's largest reserve currency (the currency in which the world's governments keep their forex reserves), for safety amid rising interest rates and fears of an economic slowdown in the US. The dollar is gaining momentum due to a sell-off in the stock market and a decline in commodities due to the recession.

The aggressive fall in the pound was seen with the announcement that the British government is considering announcing another package after the package of 45 billion pounds announced last week to rescue its economy from recession. After the fall of the pound, the Bank of England said in an official statement that it would not hesitate to raise interest rates to combat inflation.

All sectors claim to be doing well

Indian Economy on the Road to Recovery : V Ananth Nageswaran

However, foreign investors will be cautious about investing due to foreign geographical conditions

Indian economy is recovering but foreign investors will be more cautious due to global challenges, said Chief Economic Adviser V Ananth Nageswaran. Addressing a virtual seminar organized by Swadeshi Research Institute, he said that all sectors of the economy like agriculture, manufacturing and construction are doing well.

He said that the Indian economy is moving on the path of recovery. Private demand and services sector are performing better than expected. He further said that Foreign Direct Investment (FDI) will remain stable.

The Chief Economic Adviser further said that foreign investors will be cautious about investing due to geopolitical challenges. India has a well capitalized baking sector.

He further said that the Insolvency and Bankruptcy Code (IBC) has also played an important role in improving the condition of Indian banks.

A former executive of Academic and Credit Sui Group AG has said that inflation in India is currently seven percent.