Global Markets: ‘Sell-Everything’ Rout Continues!

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The Nifty 50 closed Friday’s session 1.72% down at 17,327.35 but the SGX Nifty continued the momentum and fell to a low of 17,127, although it recovered a bit and closed just above the crucial support of the 17,200 mark. Our market has been falling after the US Fed’s rate hike on 21 September 2022.

Here I’ll try to give you a view of what is currently happening in the global markets after the Fed’s rate hike. The unexpected selling pressure in our markets is largely on the back of ‘exceptionally weak’ global cues. The US markets are showing a much stronger weakness. The Dow Jones breached its June 2022 low and is trading to the lowest level since November 2021. Meaning all the returns for 2022 have evaporated. The S&P 500 and Nasdaq 100 are barely hovering above their June 2022 lows, below which they would also turn negative for the year. The same weakness is spread across other markets as well, especially the European ones. 

Equity sell-off generally diverts capital flows to gold which is one of the most popular and time-tested safe havens. In fact, gold is also investors’ favorite to tackle high inflation. But what’s happening in the bullion market when both factors are in favor of gold, i.e. high inflation and investors’ hunt for safety? On Friday, gold in the international market fell to the lowest level since April 2020, almost a 2.5-year low! That is not what gold is supposed to do when it has favorable conditions to appreciate in value. In the first week of September 2022, Silver also hit a 2-year low. All other metals are also falling sharply while prices of agri-commodities are also easing.

Oil prices which shot up massively amid the Russia-Ukraine war have corrected sharply in the last few weeks. In fact, brent oil fell to around US$85.5 per barrel on Friday, the lowest level since the start of the war. Lower oil prices are definitely beneficial for India as more than 80% of our crude oil consumption is fulfilled via imports. However, one thing to note is, what is the reason for this fall? An expectation of a global recession! If a recession comes, the benefit of lower oil prices has to be put against the loss that could potentially be incurred due to a slowdown. Therefore, lower oil prices on the back of a global recession is probably not-so-good for India as well. 

Currently, the turmoil in the currency market is absolutely crazy. All currencies are taking a massive hit against the US dollar. The closest example is the Indian rupee which tumbled at a mind-boggling pace in the last two sessions, surpassing 81 like a knife slices through butter. The Pound Sterling tanked to the lowest level against the US dollar since the 1980s! The Euro on Friday plunged to an almost 2-decade low against the US dollar. Even the Japanese Yen hasn’t been spared which is also considered a safe haven amongst currencies. Although,  the yen shot up aggressively on Thursday after Japan’s intervention in the forex market. 

Cryptocurrencies have long been underperforming equity markets. Bitcoin has crashed significantly from ~US$48,000 at the start of the year to the current price of US$18,800 and there’s no sign of recovery. Bitcoin has also failed the thesis of being better than gold to fight inflation.

Clearly, everything under the roof is being sold off as uncertainties regarding a global recession is gradually becoming a reality. Despite a two-consecutive quarter of GDP contraction, the US Fed went on for a third 75 bps rate hike and coupled with its hawkish commentary for the remaining year is surely taking the US towards some more pain. The soaring inflation and energy crisis in Europe are also sufficient enough to take a toll on their economy, which is clearly reflected in the relentless weakness of European currencies. The winters are almost here, which is only going to amplify their existing energy crisis.

So where the money is going if everything is being sold off? The US dollar. That’s the only asset that’s currently luring investors on a ‘gigantic level’. The dollar index (which is a basket of 6 currencies against the US dollar) rose to the highest level in 2 decades, over 112 on Friday. The thing is, the aggression with which the Fed is raising interest rates, all the money is flowing to the dollar to buy the US-backed securities which are serving two purposes - Sovereign safety of the world’s largest economy and a lucrative return on their parked money. Hence, gold is also losing its shine against the US dollar as it does not provide any fixed return.  

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  • Amitabh Sethi @Amitabh Sethi
    how will this impact Indian Stock market
    Like 0
    • Aayush Khanna/Investing.com @Aayush Khanna/Investing.com
      Hi Amitabh, we are already seeing a sell off in the Indian market, and the rupee against the US dollar.
      Like 0
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  • Amitabh Sethi @Amitabh Sethi
    so what does this mean for Indian Stock market
    Like 0
  • Abhishek Saddi @Abhishek Saddi
    as mentioned on your FOMC meeting article that Dow Jones will be soon seeing sub 30000 levels.... Friday Dow Jones saw 29252 as the day low..... more lows to come in the coming weeks and we should soon see pre 2020 lows in Europe top along with US markets, including Hang Seng and the Shanghai
    Like 0
  • PAVAN KUMAR @PAVAN KUMAR
    u mean wat everyone should sell in loss and sit
    Like 0
    • Devendra Sen @Devendra Sen
      don't sell.. do short everything.. 🙂
      Like 0
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  • Sameer Srivastava @Sameer Srivastava
    very nice article. If all the money is going to the US dollar then does this impact America's inflation in a good way or a bad one?
    Like 2
  • Sameer Srivastava @Sameer Srivastava
    very nice article. If all the money is going to the US dollar then does this impact America's inflation in a good way or a bad one?
    Like 0
  • Madhugunjan Kalita @Madhugunjan Kalita
    Perfect analysis at all.
    Like 1
  • Nilesh Bhadait @Nilesh Bhadait
    Boss... Nice Article ! 👍1 thing would like to say...How can whole world will accept High US Dollar Price.USD will get ZERO in nearest time compared to all World Currencies, else will be equal to them.US is already in threat & panic, how can USD investment is safe ?Please understand other side picture.
    Like 1
    • Aayush Khanna/Investing.com @Aayush Khanna/Investing.com
      Hi Nilesh, USD is the reserve currency of the world. Countries need USD to settle international trade. World cannot function without USD.
      Like 1
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  • Nilesh Bhadait @Nilesh Bhadait
    Boss... Nice Article ! 👍1 thing would like to say...How can whole world will accept High US Dollar Price.USD will get ZERO in nearest time compared to all World Currencies, else will be equal to them.US is already in threat & panic, how can USD investment is safe ?Please understand other side picture.
    Like 0
  • Nand Mishra @Nand Mishra
    Nice
    Like 2
  • Rishi Baid @Rishi Baid
    Nice
    Like 1
  • Vivek Purav @Vivek Purav
    sell and go to sleep
    Like 1
  • Nellepilly Rangan Rajsekher @Nellepilly Rangan Rajsekher
    I feel India is in a dofferent league. No doubt there is global pressure on inflation. But post Russia stand off, Emergy crising in Europe and anti China sentiments world over India wound see inflows. Hemce my contrariam view. In my view, Indian markets would touch all time high before end of 2022.
    Like 1
  • Rajendra Agrawal @Rajendra Agrawal
    so being a normal investor what should be the strategy to work in this condition
    Like 1
    • Aayush Khanna/Investing.com @Aayush Khanna/Investing.com
      Hi Rajendra, investors can do hedging, diversification, profit booking, averaging on dips etc. Do what suits you best.
      Like 1
    • ankit Sarangal @ankit Sarangal
      invest in gold.. vesey better hoga sometimes do nothg is evrythg... same money is making money brother...
      Like 1
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  • Jayram Yadav @Jayram Yadav
    Good👍
    Like 1
  • ABBAS ABBAS @ABBAS ABBAS
    so good
    Like 0
  • ABBAS ABBAS @ABBAS ABBAS
    so good
    Like 0
  • ABBAS ABBAS @ABBAS ABBAS
    so good
    Like 0
  • ABBAS ABBAS @ABBAS ABBAS
    so good
    Like 1
  • Mukesh Kumar @Mukesh Kumar
    market has made bottom. one week of weakness is left. Market will move upwards after that. Don't worry
    Like 0
  • deepak panda @deepak panda
    Don't fear, this is a correction only.
    Like 0
  • Sitaram Jhanwar @Sitaram Jhanwar
    very nice
    Like 1
  • Vithal Mall @Vithal Mall
    Very nicely explained
    Like 1
  • Sivareddy Yamasani @Sivareddy Yamasani
    at avg 1450
    Like 0
  • Sivareddy Yamasani @Sivareddy Yamasani
    I have 234 Infosys sharewhat can I do
    Like 0
    • Vithal Mall @Vithal Mall
      Sell and buy titan
      Like 1
    • Vithal Mall @Vithal Mall
      And if not buy itc which will fell a quater on nifty down choice is yours
      Like 0
    • Vithal Mall @Vithal Mall
      But any way get out of infosys for the time being
      Like 0
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