FIIs turn net sellers, markets in correction mode while investors should be cautious

The domestic stock markets have been going through a correction in the last few days, mainly due to some disappointing results and a sharp hike in the key interest rates by the Reserve Bank of India (RBI) during its monetary policy review last week. The markets have come down by almost eight percent over the last 10 sessions. They are expected to trade in a range with a negative bias in the coming few weeks due to disappointments on the results front and some nervousness in the global economy, especially China and the US.

Long-term investors can use the market corrections to invest in fundamentallygood stocks. There is a lot of volatility in the commodity and currency markets as well. In the currency markets, the US dollar is losing against the basket of major world currencies. The Euro touched almost USD 1.50 mark due to concerns over new job creations and the overall US economy last week.
These are some of the major events of last week that are expected to drive the markets in the short term:
CONCERNS IN US, CHINA
Last week, concerns mounted over the sustainability of the US economic recovery after reports of a slowdown in the services sector and less-than-expected jobs created in the private sector. The Federal Reserve has continued its soft monetary policy but it has failed to yield the expected results in terms of triggering a lasting economic recovery. As the inflation rate is rising, the Federal Reserve is running out of time. It cannot keep on extending its soft monetary policy.
On the other hand, there are concerns of a slowdown in China due to their monetary policy tightening measures . The impact of rising concerns in China is visible in the sharp volatility in the commodity markets. These global These global concerns are adding to the nervousness in the domestic markets.
FII selling
The foreign institutional investor (FII) factor is not in favour of the domestic markets . They have turned net sellers in the markets here recently. This has resulted in the deep market correction . Analysts believe FIIs are taking a cautious approach due to the disappointing results season and several negative factors playing in the domestic as well as global markets.
In the absence of any positive triggers possible in the near term, many FIIs are holding their positions in cash. Investors should be cautious as the markets are expected to remain volatile with a negative bias in the short term.
SELL-OFF IN GOLD, SILVER
Profit booking happened in gold and silver last week. There was a sharp drop in the prices. Silver almost lost 20 percent over the last one week and gold also lost quite significantly. Analysts believe the main reason for such a sharp drop is the cut down in speculative positions due to increase in the margin requirements at various commodity exchanges.
However, the current decline in price is good for the long-term investor who can look at taking positions at lower price levels. The investment outlook for gold and silver is still quite bullish due to uncertainties at the global level. Investors can also take a cue from the fact that the central banks of many developed and developing countries are constantly investing in precious metals.


INFLATION
The inflation rate which was a problem mainly in emerging nations last year is slowing rising in the developed countries as well, due to the rising prices of commodities in the global markets. In India, the headline inflation rate is around nine percent. It is expected to remain high in the short to medium terms.

However, policymakers are committed to taking strong measures to control the inflation rate even if it is at the cost of economic growth to an extent. The RBI recently raised the key interest rates by 50 basis points to check the rising inflation rate which is expected to aggravate further due to the expected fuel price rise in the coming days. concerns are adding to the nervousness in the domestic markets.


FII SELLING
The foreign institutional investor (FII) factor is not in favour of the domestic markets . They have turned net sellers in the markets here recently. This has resulted in the deep market correction . Analysts believe FIIs are taking a cautious approach due to the disappointing results season and several negative factors playing in the domestic as well as global markets.

In the absence of any positive triggers possible in the near term, many FIIs are holding their positions in cash. Investors should be cautious as the markets are expected to remain volatile with a negative bias in the short term.


SELL-OFF IN GOLD, SILVER
Profit booking happened in gold and silver last week. There was a sharp drop in the prices. Silver almost lost 20 percent over the last one week and gold also lost quite significantly. Analysts believe the main reason for such a sharp drop is the cut down in speculative positions due to increase in the margin requirements at various commodity exchanges.

However, the current decline in price is good for the long-term investor who can look at taking positions at lower price levels. The investment outlook for gold and silver is still quite bullish due to uncertainties at the global level. Investors can also take a cue from the fact that the central banks of many developed and developing countries are constantly investing in precious metals.


INFLATION
The inflation rate which was a problem mainly in emerging nations last year is slowing rising in the developed countries as well, due to the rising prices of commodities in the global markets. In India, the headline inflation rate is around nine percent. It is expected to remain high in the short to medium terms.

However, policymakers are committed to taking strong measures to control the inflation rate even if it is at the cost of economic growth to an extent. The RBI recently raised the key interest rates by 50 basis points to check the rising inflation rate which is expected to aggravate further due to the expected fuel price rise in the coming days.