It is Indian banks’ most carefully-guarded secret—that the already-wounded 30-share Sensitive Index is going to plummet further. The only saving grace is that banks are prepared for the crash. Let’s take ICICI Bank, whose internal research teams have prepared the management for a fall to 74,000 points, or lower.
The bloodbath stems from the ‘Global Village’ that we visited in the Utopian 1990s—a nice, cohesive and bonded world. Today, the cohesion is visible only in slithering global indices, and fluctuating currencies and futures trades. It is not just India’s Sensex; market indices worldwide are collapsing.
A Perfect Storm of Global Unrest
There is war in the air around us. The Israel-Hamas conflict is more than a geopolitical tragedy; it is a numbing economic disruptor, cutting down growth on multiple fronts. Global energy prices have surged on fears of supply disruptions. Oscillating energy costs have acted like incendiaries, fanning inflationary fires and pushing central banks to revisit monetary policies. For emerging markets like India, heavily reliant on oil imports, such fluctuations are impacting fiscal deficits, consumer sentiment and an economic redux.
On its own, the Russia-Ukraine standoff continues to send shockwaves across the global grain and energy markets. The interconnected nature of global supply chains means no economy can insulate itself from such shocks. Ripple effects are evident in rising food prices and disrupted exports, painting a grim near-term picture.
The US Presidential Elections that brought Donald Trump back to the fore have also caused market jitters, as the President-Elect has vocally announced a major shift in policy directions; creating massive uncertainty. Markets despise uncertainty. “The S&P 500’s decline reflected investor anxiety over possible regulatory changes, fiscal policies and international relations,” notes Alan Jacobs, strategist at Morgan Stanley.
The tremors were felt well beyond Wall Street, as the US dollar’s ambivalence affected global trade and debt repayment calendars. India felt the after-shocks too; markets slithered as if on black ice, and the rupee weakened against the dollar, increasing the burden of dollar-denominated loans, both straining an already wavering corporate sector.
Worst Favourite Criminal: Climate Change
Climate Change is a new villain in the saga of turbulence witnessed in the market. Catastrophic weather events—from floods in Asia to wildfires in the Mediterranean—disrupted agriculture, insurance and tourism. Indian stock markets felt the jitters when unseasonal rains in the north caused crop damage, leading to a never-before spike in food prices.
Investors are becoming increasingly wary of sectors directly affected by extreme weather patterns. The rise of Environmental, Social and Governance (ESG) investing is a silver lining, but the transition to stronger economies is threatened by its own demons, including short-term market instability.
In the larger scheme of things, India’s stock market—once a beacon of resilience during global crises—is showing signs of strain. The Sensex and Nifty have seen significant periodic drops, reflecting a mix of domestic and global reversals. Both indices are down from lifetime highs to levels they saw over 15 months back.
Little Wonder: Small Investors Are Panicking
Legendary investor Peter Lynch once said: “People who succeed in the stock market accept periodic losses, setbacks and unexpected occurrences.” This wisdom rings true now more than ever. But while it may provide solace to hardened big-ticket market players, the small middle-class SIP investor or stock market puppy is doing everything but wag his happy tail.
Investors seeing their savings dwindle are becoming alarmed. But at the end of day, the only way forward for the small investor is to take some sane advice. Stay invested. After slipping to 74,000 points, plus-minus a bit, the Sensex will stabilize and slowly begin its trudge back up, researchers feel.
But the problem for the smaller investor is immediate. In the Sensex’s clamber-down from its high of 84,500 points, those with market exposure have lost Rs 7 lakh crore for every 1,000-point slip. Simple math shows by the time ‘stability’ arrives at 74,000 points, investors would have lost Rs 70 lakh crore; that is a number giving even Big Boy investors sleepless nights.
Other than slithering numbers and grim personal tales, the factors and data discussed in this analysis tell us a core story; that markets are not just financial ecosystems, they are mirrors of human behaviour. Wars, weather and politics impact markets not due to algorithms or trading bots, but because human events resonate with the very kernel of certainty and hope.
Stock market crashes are reminders of how intertwined our destinies are and how collective resilience can be the only antidote to chaos in today’s Global Village. We created this village; we have to learnt to live in it.
Soliloquy: Hotels in India’s hills (especially where snow beckons) are booked solid each year from December 1 through February 28. This year is different. Lower, off-season rates are already being quoted from January 7 itself, which means that the hotelier community has smelt the coffee and is preparing for tough times. That is another Mother Tale in the making.
— The writer is a veteran journalist and communications specialist