The Indian stock markets have been under significant selling pressure since the latter part of August. The month of September, too, hasn't shown much respite. The bears continue to dominate the market. In the eight trading sessions in the month so far, the benchmark BSE-Sensex has declined by another 2.5%.
So, what's the outlook for the Indian stock markets now? Is a recovery around the corner? Or will the bearishness persist amid the turmoil in the global economy? Let's list down some key factors that are influencing the markets now...
One key factor that is dictating the trends in the global markets right now is China. The slowdown in China and the recent devaluation of the yuan have sent shockwaves across the global financial markets.
The other key global factor that will influence the markets is the possibility of US interest rate hike.
These two global factors are likely to impact the flow of money in the Indian markets.
Now, coming to domestic factors...
The severe rainfall deficit is a major concern that will impact food prices, rural incomes and spending. Parts of Maharashtra, Gujarat, Karnataka, Telangana, Madhya Pradesh have witnessed rain deficit in the range of 30% to 50%. Some regions have witnessed back to back droughts.
On the economic front, the GDP data for the April-June period was estimated at 7%, lower-than-expected.
There is also fear that India might have to grapple with a deflationary phase.
In short, these are the key near term factors that are under the radar of investors.
So, which way will the markets head now? Honestly, this is a difficult question. Predicting short term events and outcomes can be very tricky and is at best avoided. It is better and safer to tune out from the short term noise and take the long term path to successful investing.
The intelligent investor understands that volatility is not his enemy, but his response to volatility is. He ignores the ups and down in markets and simply focuses on companies with solid business fundamentals run by excellent management.