Worst fall in stock market on 5th February, 2018 - Super Multibaggers

Worst fall in stock market on 5th February, 2018

Worst fall in stock market on 5th February 2018

Indian stock Market followed the trend on global cues

Monday morning, the Dow opened in red and continued to fell during the day, but the major cut happened around 2:40 p.m. which is quite similar what happened 8 years ago in the year 2010. The Dow plunged almost 1600 points at one point of time during the end of the day and recovered a bit during last few minutes and at the closing time it was still down 1175 points. It was one of the all time worst fall in stock market on 5th February 2018

Reason for Market mayhem

Whatever happened in the US market was not because of any negative news on the economy but it was collective efforts of all the big and small investors after considering the future possibilities and outlook. There was no change in the fundamentals of the corporates or any major government announcement; It was an overall selling pressure in the market anticipating some strong initiative by the govt. in coming days.

One the reason behind ‘fall in stock market on 5th February 2018′ can be seen as the anticipation of Fed to raise the interest rates in United States. The Central Bank in United States, in its meeting held in last week noted that inflation numbers will remain on the higher side. To curve the inflation pressure it seems that the Fed may take some stronger decision on interest rate hike. The news regarding the increase in the average hourly rate of earnings in the country rose around 2.9 % in last month has given a strong reason for sharp increase in the interest rate.

The above increase in earnings and strong US economy prospects, chances of increase in the daily expenditure may force the government to take some steps to keep inflation in check and the foremost thing comes to our mind to control the inflation is the hike in interest rate. Central Bank in US is already thinking about increasing interest rate in the form of three 0.25% interest rate rises scheduled for this year. This number could be more now. Though, its an expectation only and nothing confirmed by any official sources.

Will this cut be more deepen?

US markets soared over 40% since President Donald Trump took over a charge in anticipation of new corporate reforms for increase in the earnings of corporates and some extra initiatives in the form of tax reforms. The Tax reform bill which already approved by the Congress in December last year, a huge corpus of over $1tn is expected to be injected in the US economy which in the form of tax cuts for corporates and the corporates would also like to share this chunk of money with their employees which will lead to further rise in the earnings of people in US. This may further hit the trigger for the central Bank to think about further rate increase. There are other reasons also which may help the Central Bank in taking these decisions. It is expected that this further could hit the stock market in US and other markets all over the world are also very much affected with the health of US market.

 

Indian stock market to be unaffected

 

Many developing world economies have borrowed heavily in dollars and will be stung by the higher cost of servicing their debts. All developing countries markets already witnessed one of the worst “fall in stock market on 5th February 2018″ and may may follow the trend of US market in future also and witness some further downside. Investors are suggested to remain cautious on global cues, though we don’t expect that any scenario will reach at the levels of 2008 turmoil but major correction in global market may shake the investor’s sentiments in coming days. As far as full year is concerned market may remain volatile and may continue to face regular set-backs in coming months.

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