Are markets in trouble? Sensex dip and Rupee volatility explained in four charts

Stock markets in many countries have been hit due to several reasons like global tension caused by a possible Russia-Ukraine war, rising inflation around the world, and the fear of an interest rate hike by the United States.

Global tension caused by a possible Russia-Ukraine war, rising inflation around the world, and the fear of an interest rate hike by the United States have taken a combined toll on the stock markets in many countries. The Sensex fell 5.17 per cent in the last 30 days, the DAX fell 3.58 per cent, Dow Jones fell 2.27 per cent, and the FTSE fell 0.31 per cent, as of 8 pm IST, February 15, 2022.

"With inflation at multi-decadal highs in a number of countries, the evolving macroeconomic environment is being rendered highly uncertain by divergent monetary policy intentions and actions," said RBI Governor Shaktikanta Das. Financial market volatility and geo-political tensions are adding layers of ambivalence to the outlook, he added.

However, experts believe that more than inflation, geopolitical tensions rising from the Russia-Ukraine event are responsible for the turbulence in the stock market. "Inflation is not a big worry and it has not shaken the market too much. Geopolitical tensions are happening at a time when India's growth is not very good and they are weighing more than interest rate hikes in the US," Madhavi Arora, Lead Economist, Emkay Global Financial Services, told India Today.

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Emerging markets generally pay the price of global tensions and now, too much is happening in too short a time, thus changing the behaviour of foreign investors, she added.

Foreign investors have pulled out thousands of crores of rupees from the Indian market amid these uncertainties. A record net of Rs. 48,538 crores in Foreign Portfolio Investments have been pulled out from the Indian market in this fiscal year as of February 14. In fact, after pouring in more money into the Indian stock market, foreign investors pulled out Rs. 72,661 crores alone in the two-and-a-half months since December 2021.

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