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TRUMP AND OUR MARKET CRASH

Donald Trump

Like the Indian rupee, which has been the worst performing Asian currency in 2018, so has been the case with the Indian stock markets. The share prices have been falling in trading session after session and dozens of prime scrips trade at a discount of over 50% to their 52 week high. As they say, the entire stock market is up for sale for the Diwali festival season. A market which was in a confident bull phase in recent memory, is now in the firm grip of bears, who are driving the prices down. Uncertainty looms large on the bourses. It is not that the Indian economy has come crashing down (India remains the fastest growing large economy), but the markets have certainly come crashing down. While everyone agrees that it will all be good in the long run, it is the immediate bloodbath on the markets, which is a matter of worry. The market cap has been decimated by Rs.9 lakh crores since October 2017 and losses are writ on the financial statements of traders and institutional investors. The reason that the markets are so nervous and negative, are primarily to do with the disruption of the global economy and diplomacy, caused by Donald Trump, the eccentric and maverick American president. His sudden policies and constant sabre rattling, have unsettled the global currency and stock markets. It starts with the dollar tightening being done in the USA, by increasing interest rates, due to which global funds are rushing into dollar assets. To India, it has meant that foreign investors have sold shares worth over Rs.66000 crores since January 2018 and have exited from our bourses. Such sell out by foreign investors, not onlyerodes stock market prices, but the value of the Indian rupee also. The next is to do with the fresh economic sanctions imposed by USA on Iran, due to which the Iran crude oil supply will be cut off from global markets and oil prices will spike further. Crude oil prices have already crossed USD 85 to a barrel and are expected to cross USD 100. India is a huge oil importer and such a price rise will only deteriorate our CAD and will put further pressure on a deteriorating rupee, apart from fuelling domestic inflation. The global economic uncertainty caused because of the USA-China tariff war, also subdues the moods on our stock markets, which is reflected on the share prices. If the economic uncertainties caused due to a maverick US president were not enough to unsettle our markets and currency, the domestic factors of the continuing banking crisis and the NBFC panic triggered by ILFS, have helped the bears to overpower the bulls and bring down stock market prices. The perception of risks in the mind of investors, shoots up, whe there is uncertainty on the economic and the political front. As India heads into a major election season, with elections in crucial states of Rajasthan, MP and Chattisgarh on the cards, in the run up to the 2019 general elections, political uncertainty has set in and the markets will remain bearish, aided by a maverick US president. The world awaits with bated breath, the next non confirmist and outlandish announcement of Donald Trump, which will only trigger further uncertainty and price erosion in global currency and share markets, including those of India.

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