Its Just A Healthy Correction!

The global markets saw a steady sell-off in the past couple of weeks with Dow Jones falling more than 8 per cent. S&P 500 too slipped by more than 8 per cent . Nasdaq slipped by more than 7.93 per cent in the past coupe of weeks. These indices indicate the broad-based sell-off in the US markets.
 
In line with the US markets, European markets too slid sharply. FTSE was down by 7.55 per cent, DAX slipped 9.13 per cent and CAC 40 was down by 8.01 per cent .
 
Asian markets underperformed the global peers with Shanghai slipping by more than 11 per cent. Hang Seng was down by more than 10 per cent and Nikkie was down by 9.51 per cent. 

Indian markets were the clear winners as these did not fall as much as the other global markets. Sensex was down by 6.28 per cent in the past couple of weeks. Nifty slipped by 6.07 per cent. Mid-cap index was down by 6.07 per cent in line with the major Indian benchmark indices. The highlight in the past couple of weeks of trading in Indian markets was the relative strength shown by small-cap stocks. The Small-cap index was down by 5 per cent. 

The FMCG index along with the Auto and Metal index managed to fall the least among the sectoral indices. FMCG, Metal and Auto fell by 3.27 per cent, 3.95 per cent and 3.98 per cent, respectively. The worst performing index in the past couple of weeks was Bankex which was down by 7.21 per cent. IT index slipped by 5.60 per cent, while the Realty index was down by 5.95 per cent. Power index was down by 4.22 per cent. 
The FIIs continued their selling spree in January with their net sales figure touching Rs6,453 crore. The DIIs bought into Indian markets to the tune of Rs6,432 crore. 

The markets, after the sudden bout of volatility, seem keen to settle down even as the trading range in the key benchmark index narrows down. The sudden drop of 10 per cent in equity prices in the US markets in less than two weeks has created suspense in the minds of investors. Most important question that global investors are asking iswhether we have entered another bear market, where we are likely to see a slow grinding meltdown taking share prices by as much as 20 per cent from the current levels in the coming one year. While there are no such indications, it does catch attention of the investors when markets fall by 10 per cent in just two weeks. Markets have not fallen so sharply in just two weeks since 1928.
 
Investors should not worry though, as the long term bullish trend is still intact and that, as of now, the recent slip looks like a much-wanted healthy correction in a bull market. 

The global markets, earnings quality, crude oil prices and the interest rates will most likely be the most important factors in determining the stock prices in the upcoming quarters. As of now, what happens in the US markets will determine the global equity trend.