A 4 min.read !
With a little less than 2 crore demat accounts opened in the last 18 months and the Sensex breaking all time records reaching dizzy heights and with fears of a third wave not completely ruled out, a surge in crude price and an acute power shortage on the cards,the disconnect between economy and euphoria strikingly felt,it is time investors exercise caution before taking a call.
There has been a lot of disconnect between economy and euphoria.If we look at the way the spate of demat accounts opened in the recent times we understand that there has been a relentless race for possessing stocks come what may ! In FY 21 about 1.42 crore demat accounts were opened (against 49 lakh accounts in the fiscal previous to it.In FY 22 in June quarter alone 24 lakh new demat accounts were opened and a logical extrapolation should result in 1 crore accounts by the end of the fiscal barring unforeseen developments. The nation as on date has more than 5 crore demat accounts. As per CDSL( Centre for Depository Services Limited ) about four crore demat accounts are active as on date.
The Sensex registered a growth of about 16% in the calender year 2020 while it registered a growth of about 25% between January 1 2021 and October 8 2021 (from 47,869 on 1st January to 60,059 as on 8th October ).This ‘relentless bull run’ has created a sort of euphoria and as such a large number of retail investors many of them novices are joining the band of investors trying to test their luck without an idea of the inherent intricacies involved in the market performance and also the risks involved therein. There is nothing wrong in investing by anyone but it should be backed by sound advice from experts and experienced and with due care and caution so that the hard earned money does not go for a ransom.What if the bull gets fatigued and decides to go for vacation for resting and recharging? Well, this is what I want to concentrate in the next few lines.
The following are the major points to be kept in mind which may act as catalysts for a sizeable correction in the markets in the near future as per my perception:
a) Power crisis in China which is considered a global factory -the implications of the fall in output there are understandable.
b)Whether China would bail out Evergrande
c )Acute semiconductor /Chip shortage globally- this may affect several sectors from smart phones to satellites and sectors from automobiles to AI
d) global supply chain disruptions and cost escalation in logistics ( leading to cost escalation of many items)
e)Power shortage in our country too (may be to a lesser extent than that in China ) due to coal shortage -efforts are on to some how bridge the demand-supply gap by imports )-it is apt to recall that much more than 60% of total power in our country is from thermal power plants and as such this may have a huge impact on production capacities and hence on unemployment and economy
f)The much talked about third wave and the extent of lethality that may be unleashed by it.
g) The success in achieving the pre set targets of vaccination by year end.
h)The likely withdrawal of stimulus by the Fed somewhere from November( the perception that such a withdrawal would not be sudden but tapered is a cushioning point)
i)Crude currently hovering at $85/barrel is likely to touch $90-$100 per barrel soon simply because of an increased demand from energy hungry countries like India and China but with almost an unchanged supply ]
j) rising concerns of inflation
j)Failure to address US debt ceiling by law makers may have serious financial implications globally.
In the end my intention of covering certain fundamentals on the current scenario is only to help investors (especially the new and recent entrants) minimising losses in the event of a major fall in the indices.I find so many articles elaborating on how even penny stocks had fetched fabulous and fantastic gains of large percentage in the last six months or one year but I find very few articles ( may be that I missed them) on alerting the small and retail investors more so the novices trying to test their luck.If it is of little help to a few freshers, I feel satisfied that this write up served its purpose.
References:
2.https://www.bbc.com/news/world-us-canada-58820071
3.https://www.cbsnews.com/news/debt-ceiling-new-deadline-early-as-mid-december/
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