Disclaimer: This is not financial advice & just for educational purposes.
This blog aims to give you the appropriate guidance, understanding & clarity to rule out the fear & uncertainty that grips the financial markets.
Let’s dive in…
Subject: The rise & fall of SENSEX
Rise (25th March 2020-19th October 2021)
Fall (19th October 2021-17th June 2022)
Aim: To analyze the events & their impacts in the mentioned periods of rise & fall.
I need you to understand the power of confluence. Any significant trend is caused by a confluence of events, i.e., a combination of 2 or more events in a given period.
The confluence of the rise: (25th March 2020-19th October 2021)
|COVID lockdown (An unprecedented event)||Mass panic led to the collapse of the financial markets to 2016 price levels.|
|The US pumped $13trillion into the world economy & the interest rates were reduced. 
Reason: To counter COVID
|The massive boost in cash flow.|
|The economic impact was not as severe as anticipated.
Reason: Internet companies were functional. Employes were being paid their regular wages, and people were also saving on travel & entertainment expenses, etc.
|Considering the $13trillion influx & the massive savings through Work-from-Home, people became cash rich.|
|Institutions & people start the search to park this massive chunk of cash.||A massive influx of capital into the financial markets.
Participants: FPIs, DIIs, retail investors & new investors.
For perspective, FPIs single-handedly pumped 1.97lakh crore between (Oct 2020-March 2021). 
|Connecting the dots:
COVID caused mass panic leading to a considerable discount in the financial markets→ Massive amounts of new money was pumped into the economy & interest rates were reduced→Economies were not affected adversely due to a functioning financial world online→ Institutions & investors influx markets with colossal capital.
|The post-COVID rise (25th March 2020-19th October 2021).|
The confluence of the fall: (19th October 2021-17th June 2022)
|$13trillion was pumped into the world economy & interest rates were reduced. Reason: To tackle COVID.||The US started seeing signs of money-induced inflation in August 2021.
Reason: People had money to spend, but the demand wasn’t met. Hence causing a shortage in supply & increase in demand.
|From October 2021-June 2022, the FPIs have pulled out more than Rs31,000 crores from the Indian markets.||Massive selling pressure led to the drawdown in the Indian markets.|
|On 24th February 2022, the Russia-Ukraine war started||Massive uncertainty & fear when the world was recovering from COVID.
|The US inflation goes mainstream, declaring the highest inflation in the past 40yrs. The after-effects are rate hikes.||Inflation & that too a record-breaking one, leads to massive fear & rate hikes, ultimately leading to a cash crunch. Therefore people go conservative.
|The looming threat of recession||More fear & uncertainty.|
|Connecting the dots:
Massive amounts of cash injected→Massive sell pressure in Indian markets→ War→ Record breaking inflation→ Looming threat of recession.
|The fall (19th October 2021-17th June 2021).|
What do we do with this information? How will it conquer or prepare you for uncertainty & fear?
Let me ask you some questions.
- Now that you know the events for the fall, do you think that these events are permanent? Can we overcome the events mentioned above? Has the price been discounted appropriately for the events mentioned above? What is the future of the world?
- If you have answered the above questions objectively, I leave you with one last question. Is this an opportunity & can we capitalize on it?