Indian equity market Sensex i.e BSE Sensex lost 2.25% in a single day, it is almost down by 10% in a month and around 13% in a quarter. On the surface, the major reason is the ongoing war that has created an environment of FUD and the shortage of the crude oil. Also, the shining star of the Indian industry i.e Indian IT industry, which is majorly an export industry is also heavily stressed due to earlier announced tariffs and now with the latest advancement on AI technology, especially claude AI.
But in my view, the problem is now much deeper as Indian currency rupees keep weakening that makes buying crude more expensive with increase in the price of the crude oil. Though I have not yet witnessed the price hike on the manufactured goods yet but with shortage of cooking gas, the local street food vendors has already increased the price of their food items. I am not sure, may be the goods that are getting manufactured currently will come with new price tag in coming days to hit the shelf and increase the inflation in coming days. With job opportunuties getting reduced and price getting increased, it started looking a very bleak picture to me.
Dependency on the import of crude oil cannot be eliminated at all especially when 85% of need is fulfilled by it but I feel this will raise some serious thoughts on government policies and priorities for the coming future. In this scenario, most logical thought it to reduce the consumption of oil and check for the "crude oil" alternatives internally. This will might cause the increased government spending in the Energy sector, maybe with special focus on renewable energy.
Also, a constant war that is ongoing in different parts of the world may prompt the government to further spend on the defence sector. Also, I believe they might focus on generating revenue by exporting defence equipment.
Though the Indian equity market is trading at the bottom and it look like few of the sectors are going to be the potential sectors in the future but exact question comes if whether it is the right time to invest in these potential sectors?
Though for the long term, I am sure these are going to grow but for short term, I guess I will not be making any bet on them and I have the following reason.
We all know, policy creation and implementation take time. I believe they will do think on how to overcome the crisis and strengthen the economy but in the current short term, we can witness further drops.
There are lot of foreign investments in Indian market, if due to uncertainty caused by war, or for any other reason, if foreign institutional investors are going to sell, this will definitely cause the market to drop further.
There is a famous strategy that says "Buy the dips" but to be honest there is another famous metaphor that says "Do not sail in troubled waters". I will be very honest here, I feel the current scenario as high risk and uncertain and a good time to observe and keep a keen watch on market and the geopolitical events going on.
These are my personal beliefs, but who knows if high rewards will be lying on high risks. So what do you think of current situation?
