What is with the market? why did the stock market fall today?

Why is the market falling?

Well, frankly NOBODY has an answer. Also the 3rd question has a wrong tense. Falling looks like present continuous, it is not. I have no clue whether it will fall tomorrow. I know it fell today.

Let us look at some broad reasons about why the market is showing weak signs:

1. Weakness of the Rupee: this is a clear chicken or egg situation. Is the market falling because the Rupee is weakening or is the Rupee weakening because the market is falling? Almost impossible to find out, but each is feeding the other.

2. Forget FII buying, there is FII selling! Our market is clearly FII driven -and their being away from the market is bad enough. Instead of buying the FIIs are actually selling.

3. The domestic investor is either dead or migrated. So new money coming into the market is not really happening. He is busy redeeming his mutual fund units, surrendering his life insurance policies, and refusing to lose more money to the brokerages.

4. The Indian middle class is refusing to buy direct equity – they seem to love real estate and gold. God bless him.

Apart from all this, when people need money, they are selling equities to furnish their homes or make a down payment to buy a house!

The National Spot Exchange of course took its toll on whatever was left in the market. When a stock exchange says ‘we may not be able to meet the pay out requirements’ it is panic time. Typically if I had a payout of say Rs. 4 crores as a broker, I would sell some other shares worth Rs. 4 crores and stay in cash till the pay out happens smoothly.

This means there could be excess liquidity in the system for at least a weak.

The US $ quoting at 61 is doing nothing for the liquidity in the system, and worse, the RBI does not seem to have a clue!

Well, well, lets wait for the New Governor!