Volatility on the Street: How to counter the swings

Dalal Street’s roller-coaster ride in recent weeks has kept stock investors on the edge. The Sensex and the Nifty have declined about 4.4% so far in 2022 as the proverbial bull-bear tussle played out, resulting in the market witnessing wild swings. ET looks at the factors that have influenced market moves in recent months and what should investors do:

GLOBAL FACTORS

US FED: Worry about the American central bank’s shift to a hawkish monetary policy to contain inflation has been the trigger for the current volatility. The Fed may be on track to raise rates aggressively that has clouded the outlook for stocks.


RUSSIA-UKRAINE WAR: The war has compounded problems of the global economy with supply disruptions resulting in oil and commodity prices shooting up and accelerating inflationary pressures.

FOREIGN OUTFLOWS: Outflows from domestic stocks since October have been unrelenting due to aversion to riskier assets, Fed’s tighter rate concerns and rising bond yields

LOCAL FACTORS

EARNINGS: Profitability of companies have come under pressure due to rising raw material and other input costs. The impact is expected to play out over the next three quarters.

INFLATION: The surge in prices across the board is denting domestic demand that could weigh on the recovery in the economy.

DOMESTIC FLOWS: Flows from retail investors, especially through mutual funds, have been key to the relative resilience in the stock market, which have had more aspects going against it