Stock Markets Fall Globally, Nifty Dips 2.65%, Nasdaq Dips 4.73%: See Why

Stock markets have seen a major crash today, globally. Nifty fell by 2.65%, BSE Sensex fell by 2.61%, Dow Jones fell by 3.75%, S&P 500 fell by 4.04%, Nasdaq Composite fell by 4.73%, FTSE 100 Index fell by 2.47%, till last traded on May 19. The US has seen the worst trading hours, in the past two years. At present, bears are ruling the equities, 'buy the dip' notion is having a strong voice.

Analysts' opinion

Stating the reasons behind the recent fall in the US stock markets, Analyst Parimal Ade, Co-Founder, InvestYadnya mentioned, "Weak results from US retailer target, slow retail sector sales suggesting recession ahead, inflation eating into corporate earnings, Target stock is down by 25% - worst fall in Target's stock since 1987's black Monday."

In a comment, Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown told BBC news, "A red wall of worry has built up across financial markets with investors increasingly nervous that economies are set to career into recession." Reiterating the same tone, Thomas Hayes, chairman of Great Hill Capital in New York stated, "Consumer sentiment is at multi-year lows and tied at the hip with inflation. So people are looking for signs of inflation moderating, and Target did not give them any today."

Target Corp's Q1 profit dropped by half and the company has warned about an even bigger loss due to hiking fuel and freight costs. Additionally, Walmart Inc has also trimmed its profit forecast recently. Considering this sinking profitability of the companies, the stocks markets globally have fallen significantly. With inflation, when people have to pay more to buy and the demands eventually fall, the earnings and profitability of the companies fall. This is what happened in the global equity markets in the past few days, and bears are on the run now.

Along with the US and India, the UK economy is under pressure due to high inflationary pressures along with supply chain constrictions. According to a report, the UK's inflation reached a 40-year high of 9% in April. In addition to that, the interest rate has been increased by these countries' central banks to combat the price hikes. This has impacted the stock markets negatively, keeping the bond yields higher.

Indian stock markets fall: an overview

Indian stock markets could not save themselves from the global trends, bears were rumbling on the Dalal Street today. With the fall in the stock markets, mutual funds and SIPs have also lost huge amounts. Global inflationary pressure coupled with the RBI repo rate hike stood as the major reason. Additionally, the Indian central bank is also expected to hike the repo rate again in June, this year by 50bps. Some analysts are also expecting that the repo rate can teach up to 5.15% this year, which will eventually impact the corporates' profitability. With a higher repo rate, corporates who have debts will be doomed, they will be required to pay higher interests for their debts. This will hamper their stocks. So, now, it will be wise for investors to invest in debt-free stocks, as the repo rate is expected to be raised by the RBI.

(Also read: 4 Stocks To Buy Today As Markets Have Come Crashing Down)