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Share Market: In recent days, the Indian stock market has been witnessing a huge decline, which has created a wave of concern among investors. The NSE’s Nifty index has fallen 16 percent from its all-time high. Concerned over this decline, Moti Lal Oswal Financial Services Chairman and stock market veteran Ramdev Agarwal expressed his concern over this decline and said that if the decline continues, the market may fall further.
Market downturn and its impact
Speaking to CNBC-TV18 in an interview, Ramdev Agrawal said, “Every recovery has a new story attached to it and that is the beauty of the market. Right now we are in the process of recovery as the pace of earnings has slowed down, but it has not completely broken down.” He said that the market has declined due to many reasons. One of the major reasons was the delay in government spending, the impact of elections and obstacles in various government works. However, he said that this phase is over now.
Raamdeo Agrawal also pointed out that the PE ratio of Nifty has come down below 20, which is lower than the average of the last 10 years. He also pointed out another big challenge, which is the imbalance between large, mid and small cap companies.
Imbalance between large, mid and small cap companies
Ramdev Agrawal said, “In the last five years, Nifty has grown by about 95-96 percent, while mid-cap stocks have seen a spectacular growth of 177-180 percent. At this time, the difference between mid and small cap companies is very big. A difference of about 100-110 percent is understandable, but it means that an imbalance is being created.” He believes that to reduce this gap, investment in large and mid-cap companies will have to be promoted. Apart from this, there is also a big difference between mid and small caps, which needs to be reduced soon.
current situation of stock market
On Monday, the Indian stock market had a positive start. Investors were happy thinking that perhaps the Sensex is improving, but after half an hour the market fell again. When the market opened on Monday, the Sensex saw a gain of more than 400 points, while the Nifty also rose by more than 100 points, but after some time both the major indexes started falling.
Thus, although a positive trend was seen initially, the market volatility and investor anxiety pushed it towards a downturn. This decline clearly shows that there is an atmosphere of uncertainty in the market at the moment and investors need to be cautious.
Reasons behind the market crash
There can be many reasons for a fall in the stock market, the most important of which are:
- Impact of economic recession : The stock market is also under pressure due to the global economic recession and especially the slow growth of the Indian economy.
- Delay in government spending : Delay in elections and government schemes has also affected the market. Due to these reasons, the confidence of investors has decreased to some extent.
- Declining PE Ratio : As Raamdeo Agrawal pointed out, the Nifty’s PE ratio has fallen below 20, which is lower than the average seen over a long period of time. This means that stock prices have become relatively cheaper, but it could still be a cause of concern for investors.
- Excessive growth in mid and small cap companies : Mid and small cap companies have grown excessively in the last few years, leading to imbalance in the valuation of these companies.
What can be the solution for investors?
According to Ramdev Aggarwal, if this imbalance is to be removed, then investors need to change their strategies. Investment in large and mid-cap companies will have to be increased, which can improve the market. Apart from this, investment in these companies will also have to be promoted to reduce the imbalance between mid and small cap companies.
Currently, given the declining market conditions, investors are advised to remain cautious. Long-term investors may already be benefiting from the rising value of mid and small cap stocks, but they should invest cautiously.
The Indian stock market is currently showing signs of decline, and there are many reasons for this decline, including the global economic slowdown, delay in government spending and excessive valuation of mid-cap stocks. However, the possibility of a market correction still remains. Investors need to balance their investment strategies, especially by increasing investments in large and mid-cap companies to correct this imbalance.
