Explainer: What Is Making Indian Share Markets So Volatile?

Share Market Today: On February 8, Sensex opened at 57,621 and rose to 57,925. Later, it fell to 57,058, repeating the cycle of ups and downs throughout the day. Nifty50 touched the peak of 17,536 and later fell to 17,119.

New Delhi: Indian share markets have been very volatile for the past couple of weeks. On Tuesday, the benchmark index, Sensex, was showing high fluctuations. It opened at 57,621 and rose to 57,925. Later, Sensex fell to 57,058, later repeating the cycle of ups and downs throughout the day. As of 3 PM, the index was trading at 57,523, around 100 points lower than the opening high.

Nifty50 too has been very volatile. After touching the peak of 17,536, on Tuesday, it fell to 17,119. At 3 PM, the index was trading at 17,220, around 300 points below the opening level. Realty and Bank shares were showing weak performance.

But what explains the volatility in the share markets of India. Let us have a look.

Sell-off By Foreign Investors

Foreign Investors are an important part of Indian markets. On Monday, the US released its job report. The report was a fairly positive one. After the report, according to Economic Times, there are high chances that the Federal Reserve, the central bank of the USA, will raise the interest rates to control inflation.

This rate hike will lead to higher bond yields and investors prefer bonds over markets from the point of view of safety. This has played a major role in Indian share markets acting more volatile than usual.

Monetary Policy Committee Meeting

The Reserve Bank of India (RBI) is organising its meeting on the Monetary Policy between February 8 and February 10. The outcome of the meeting will be announced on Thursday, February 10. The investors are worried that the RBI may raise policy rates, leading to an outflow of money from the share markets to the banks.

The rate hikes are important to control the inflation rate. Also, central banks across the globe are planning to adopt a tighter monetary policy to limit the burgeoning fiscal deficit due to pandemic support schemes.

This too has played a major role in dampening the spirit of the investors.

Rising Oil Prices

In just a matter of a few weeks, crude oil prices have jumped from $65 per barrel to $93 per barrel. According to media reports, this is due to rising geopolitical tensions across the globe.

Russia, which is the second-largest supplier of oil to the world, is very close to an armed conflict with its neighbour Ukraine. On the other hand, in the Middle East, Houthi rebels in Yemen and UAE are constantly exchanging fires.

With the supply sources being so stressed, the oil prices are rising. This has further put pressure on the central banks to adopt a hawkish stance, leading to volatility in markets.

If reports are to be believed, the market volatility will continue for a few more days.