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Why did the stock market crash and what should you do now?
If you are an investor in the stock market, have the events of recent days have caused much concern. Think of the black Tuesday 22 January, when the market fell by more than 11 percent in the first few minutes of trading. Nervous sellers pushed the panic triggered sends the markets into a free fall until it hit the power switch, which automatically causes all trading stopped, both at BSE and NSE. The 30 Mutual shares lost nearly 2273 points over the day before to buy certain value made it to recoup some losses. Finally, they closed the day at 16,729.94 Points, nor to 875.41 points. have the outlook for the target = "_blank"> stock market seems to have changed overnight. Let's take a look at the main factors for such a drastic decline in the markets.
Fears of a recession in the U.S.
One of the largest Causes for the heavy fall in the markets is the fear of recession in the U.S. economy. The global investment climate has addressed the impact of the subprime crisis in the U.S. mortgage market their last tribute. Big investment banks and conglomerates are to declare big losses and investor confidence has been shattered completely. There is a saying that, if the U.S. sneezes, the whole world flu. No wonder that most economies are having links with what is happening there. The effects are felt in our markets and the negative impact on the IT companies, BPOs, KPOs, export-oriented enterprises and other sectors are concerned in the long term.
Huge Sales by FIIs and hedge funds
Hedge funds and foreign financial institutions (FIIs) have also begun to sell in our markets. This is because they reallocate their investments and want to cut their losses due to book gains of economic collapse. The volatility of financial markets today is the result of the lasting and severe selling pressure from investors of all classes through the uncertain times and events.
IPOs drained out liquidity from the
And domestic factors contributed to the record in the fall no small measure. The primary market has been a large number of IPOs flooded. The liquidity was sucked out of the market as people in these services with the expectations of windfall gains on invested listing. Reliance Power IPO oversubscribed set was provided by as many as 72 times with investors in bids for over 1,654.8 crore shares against 22.8 crore shares. As per an estimate, was more than Rs 60 000 crore the offer by the use of blocked money to liquidity problems in the secondary market.
Do not panic and stay invested for the long-term
If you have a long-term investor who invested in fundamentally strong companies, you should not too much worried about the volatility and to sudden downturns. Remain invested and use the opportunity to buy at lower levels. There is absolutely no need to push the panic button and start selling under high volatility.
Someone once asked the investment guru Warren Buffet, when the right time to sell his shares, and the answer was "Never, and if you are a good investment climate" have. Also, if you do not have a high risk-taking capacity, do not try to make a fast buck by to make the investment in the so-called momentum stocks. You can lose their value in no time, and you are next to nothing to hold. Thus, a smart investor and residence invested for the long term.
About the Author
Stock Broker employed with a leading Brokerage firm in India. To read more about Online Trading with Stock Brokers click here.