This is my second article in “Why Indian Stock Market is down” series. First article, I wrote around 11 months back in March last year when Indian stock market saw sharp down trend which lead market in to 15000 levels after seeing 21000 levels two months back. People can access this article by visiting Why India stock market is down? . Today condition of Indian stock market is much bad from situation when I wrote first article.
Presently, Indian stock market is fluctuating between 9000 and 10000 marks. Indian Stock market is showing lower resistance near 9000 and upper resistance near 10000 marks. At this position of Stock Market, every person has only question in mind that why Indian stock market is down? In this article, I will try to answer some of these questions that what factors lead to fall in Indian stock market.
First answer of this question is very simple and we all know this answer. Today, whole of world is seeing recession which is putting pressure on the all economies of world. Therefore, it has become very difficult for most of companies to remain in profit. Now if companies do not show profits then nobody will invest money in their stocks or even people and FIIs will sell their already bought stocks. Therefore, we are seeing major selling pressure in most of these companies which are showing decrease in profits or losses.
Second reason is related to over valuations of Indian economy and frauds in stock market. Many stock analysts cautioned people when Indian stock market touched 20000-21000 points that actual worth of stock market is only 15000 points and stocks are highly overvalued. However, most of people did not give any consideration to this point because of huge profits being given by these stocks. We all know about the Reliance Power IPO and how whole world become mad about this stock, whereas Reliance Power had nothing to show on ground and most of its projects were to start in future.
We can also give the example Satyam fraud and how Satyam manipulated with its balance sheets to show profit. Analysts believe that these kinds of frauds are very common due to absence of strict laws and guidelines. Third reason behind the fall in Indian stock is decrease in available credit or cash in market. Today cash is one of the biggest problems faced by most of companies who are finding it hard to manage their daily business.
Fourth is decreased interest of FIIs and investors in Indian Stock market. After incurring huge losses in market confidence of investors has decreased sharply. Fifth reason is fear of even worst time ahead. There are some estimates which suggest that worst is still to come if recession continues. Therefore, every person want to save his hard earned money in a place where it should remain safe for future.
Sixth reason is massive fiscal deficit of Indian government which can decrease world rating of India as country to do business. These are some of reasons which are contributing towards fall in Indian stock market. Moreover, this fall in stock market also points towards massive problem in basics and lack of control.