Global sell off – contagion effect

Today’s market fall is possibly the result of the weakness seen in US markets overnight.  US equity markets have corrected more than 3% yesterday.

Taking cue from there, Asian markets opened weak and Indian markets followed that.  Now the European markets are also in the red today.

The Indian market may continue to remain volatile over the next few weeks still clarity emerges in the global markets. The quarterly results of the companies which are expected over the next few weeks are expected to be positive.

The key things which help to change the sentiments for Indian are oil prices, USD-INR exchange rate and US Government securities yield with regard to global markets.  If any or all of them start going down, then we can see a quick turnaround in Indian equities.  The results of September quarter will also be able to change the mood of the market, if the hope of growth in earnings holds good.

This is not a time to panic and book losses.  We shouldn’t be converting the notional losses to actual losses by exiting in panic.  This is the time to buy,  if you have cash.  If you are fully invested, then stay put.  The key thing is to see if you have adequate resources to meet your short term needs and are insulated from the market movements.  If yes, there is nothing to panic.  The panic in the markets happen for different reasons.

In these kind of markets the recovery can also be swift and furious.  You need to stay invested to take advantage of the swift changes as and when it happens.