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NIFTY had had a massive decline of 353 points or about 3% in the first three trading sessions of this week. The first thing that comes to my mind for this decline is the surprising statement from US president Donald Trump’s early this week in which he stated that he would raise tariffs on $200 billion worth of Chinese imports from 10% to 25%. Amidst the global market selloff this week, Nifty was not spared. However, if we think the unexpected path of US-China trade war deeply, it is not the only reason why investors have gone bearish on the Indian market. In fact, whatever the result the trade war takes should not have much impact on the Indian economy. This is because the Indian economy still depends a lot on domestic consumption growth. However, that’s where the problem lies. The domestic consumption demand had shown signs of a slowdown.

Recent quarterly results from some FMCG companies have been lackluster. Weak volume growth and muted outlook provided by companies such as Godrej Consumer (NS:GOCP), Hindustan Unilever (NS:HLL), Dabur India Ltd. (NS:DABU) and Britannia Industries Ltd (NS:BRIT) show that all is not well with India’s consumption story. The worsening economic conditions could also be corroborated by the latest passenger vehicle growth numbers provided by auto companies’ viz. Maruti Suzuki India Ltd. (NS:MRTI), Tata Motors (NS:TAMO) and Mahindra & Mahindra (NS:MAHM). The latest PMI numbers and unemployment numbers also portray a gloomy picture for the Indian economy.

In addition to the above issues, the uncertainty has increased as there is no clear picture of the election results yet. The volatility shown by crude oil prices in the last few weeks also does not bode well for India’s current account deficit numbers. Markets don’t like uncertainty, but the problem is we are surrounded by uncertainties, be it related to US-China Trade war, Brexit, Crude Oil prices or domestic election results. These are some of the reasons why we are seeing a lot of volatility in the stock market this week.

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