The Sensex has seen a solid 1,600 points fall since Dec 3, eroding investor wealth, as an expected Santa Rally has been quashed. The Sensex which closed at 36,241 points on Dec 3, 2018, last traded at 34,625 points.
While today, the day of election the losses have been limited, as investors bet on domestic institutions lending support, the last few days have been disastrous. Let us examine the factors that led to this fall of 1,600 points in just 6 trading days.
1) Slowing global growth
There are worries that global growth is slowing. Chinese import and export data and jobs data from the US led to a sharp fall in the global markets, on worrying tremd of slowing growth.
This pushed indices across the globe lower, including India.
2) Slowing inflows into mutual funds
Inflows into equity scheme of mutual funds have seen a knock of 33 per cent in the month of November and the slowest since Aug.
Inflows into equity funds for the month of October and September were Rs 14,783 crore and 11,251 crore respectively, shows the data from Association of Mutual Funds in India (Amfi). The same was just Rs 7,300 crores in Nov. It is important to remember that sustained inflows into equity mutual funds have managed to keep the indices at elevated levels.
3) Political uncertainty
The biggest worry for the markets have been political uncertainty. Until a few months ago, it was almost certain that the BJP would form the next government at the centre in 2019. However, this looks a lot more uncertain. Investors are unwilling to make commitments when things look a lot more uncertain.
4) Crude production cut
Stocks markets are very vulnerable to crude oil prices. A cut in production by OPEC members of 1.3 million barrels, saw crude prices surge once again, pushing it up by 5 per cent from recent lows.