Over the last 2 years, markets have been kind to investors globally mainly led by loose monetary policy. With worries cropping up on multiple fronts, there has been a reset in investors sentiments and liquidity. Some of the reasons for sharp fall in the last couple of months are as follows:-
1) Very high inflation leading to monetary tightening (US reported inflation of 8.4% in May 2022); 2) Oil prices have risen sharply on growing geopolitical tensions (~$120 per barrel); 3) No easing in Russia-Ukraine conflict; 4) COVID related lockdown in China worsening supply chain issues.
Indian Stock Markets
The Indian stock markets following the global cues have been in correction phase since start of 2022 on the back of continuous FII selling (continued for 8th consecutive month). Also, a bit of surprise of rate hike by RBI well before the next scheduled MPC meeting also impacted the market sentiment over concern of high inflation. However, we seem to have fared far better with 7-8% drawdown from highs vs all other major markets correcting more than 10%.
However, the same is not true for a lot of mid and small-caps companies which have fallen significantly (more than 25%) from highs. Another