Crude crash and stock markets

[Jitendra Togadia]

I'm having a hard time trying to figure out the reason behind correlation between crude prices and the equities market. The crude prices have fallen because of fundamental reasons such as excess supply. So why exactly is the stock markets around the world wobbling because of it? After a lot of thought, I came to a few possibilities. One being the fact that there is an over supply because the demand for crude is lower which indicates lower production and consumption and therefore a weakening economy. Second, that markets have removed money from crude and metals and are now expected to remove from equities too.

 

[manishchan]

I'm having a hard time trying to figure out the reason behind correlation between crude prices and the equities market. The crude prices have fallen because of fundamental reasons such as excess supply. So why exactly is the stock markets around the world wobbling because of it? After a lot of thought, I came to a few possibilities. One being the fact that there is an over supply because the demand for crude is lower which indicates lower production and consumption and therefore a weakening economy. Second, that markets have removed money from crude and metals and are now expected to remove from equities too.

You can't conclude falling of the prices just based on crude. You have to consider other factors too... such as all the exporter countries of crude will have negative impacts out of crude falling prices Russia is a major one. Further China, Japan had their set of worries. on the top of this, if you notice Indian market has been holding up against all the global odds in last 8-9 months. Now FII seems to be taking out profit causing market to correct the mad bull run. Rest all by the side is taking part.

With this being said, this correction down to 8060 isn't start of downfall.. itz simply a correction and is equally needed for the healthy long term market. Long term trend in NIFTY is still up.. so this could be a good time for investment.

 

[Jitendra Togadia]

Well, there is no denying what you just said. I'm not generalizing the situation but every time the markets have tanked, all the newspaper articles will point towards the fact that crude prices have fallen. You are right that the macro fundamentals still seem favorable towards the nifty. But there is no denying that there has been a correlation between crude and equity market