Nifty ends 1.4% lower after Powell’s remarks: What should you do?

What happened in the Indian stock market today?

• The Indian stock market opened sharply lower after Fed chair Jerome Powell’s remarks about increasing rates to fight inflation. 
• Nifty plunged more than 2% to hit the day’s low at 17,166. However, the Nifty recovered about 150 points from day’s low to end 1.4% lower at 17,312.90. 
• Domestic stocks had lost Rs 3.97 lakh crore in market cap to Rs 272.98 lakh crore from Rs 276.96 lakh crore last week.

Did you know?

Q) What do foreign investors in the US most likely do when the Dollar index rises?

A) When the dollar index rises, US investors are likely to pull out money from emerging markets such as India. 

Top gainers and losers in the Indian stock market today: Major index returns

Indian stock market today: What led to the fall?

• Powell’s remarks: Analysts said that Powell’s grim warning that the Fed policy will ‘cause pain to households and businesses’ hurt investor sentiments. This was not factored in by the markets.
• Sharp rise in dollar index: The sharp rise in dollar index to above 109 has kindled fears that foreign investors may pull out money more aggressively from emerging markets such as India.
• Negative cues from Asian markets: Asia-Pacific stocks dropped more than 2.3%, amid concerns of slowing growth and rising inflation.
• Fears over high valuation: Global markets had run-up since mid-July leading to over-valuation, amid expectations that declining inflation would lead the Fed away from higher interest rates. However, the latest remarks have sparked a selloff.
• Fears that FII may pull out: Rising interest rates in the US, sinking rupee, and higher brent crude combined weaken the case for consistent foreign inflows. Foreign Portfolio Investors (FPIs) are unlikely to buy in India in this market situation.

Stock market today India: What should you do now?

• The markets are expected to remain volatile in the near future. It would be a good idea to build a war chest so that you can re-enter at better levels. 
• Invest in equities in a staggered manner. Avoid lumpsum investments.
• Keep your SIP’s running. Stick to large caps and index stocks that are best suited to navigate the ongoing volatility.
• In case of debt investments, invest only high-quality AAA-rated bonds as they have the least risk.
• Given their lower sensitivity to interest rate changes, shorter duration funds are expected to outperform longer duration funds in the current scenario.