Inflation creates market volatility, says Sunil, founder of Abacus Asset Manager

Inflation is one of the main reasons for the current market downturn, said Sunil Singhania, founder of Abacus Asset Manager LLP, in an exclusive interview with Anil Singhvi, Business Managing Editor. To control inflation, interest rates have changed one after another – one by the Reserve Bank of India by 40 bps (basis points) and the other by the US Federal Reserve by 50 bps, he said.

This has created an environment where interest rates are expected to rise further, the founder said. He said volatility or market volatility stems from the fact that when everyone is selling, it is time to buy when the market is down.

Domestic stock markets closed in red on Wednesday amid high volatility. The Sensex fell 276 points, or 0.5 percent, to close at 54,088.39.

However, it is reasonable to assume that there will be no problem in the Indian market on a long-term basis, said Singania. He added that the market had reached a point where a correction was needed.

The ongoing Russia-Ukraine war has affected commodity prices, currency and global markets. In the end, investors face all these uncertainties, he added.

Calculating the positive aspects, Singania said that while the price of metals has fallen by 15 per cent, the price of oil, which was once close to USD 130-135, has now dropped to a level close to USD 100-105. He is also hopeful that the price of crude oil will come down further with positive news. He expects a correction between USD 10 and 20.

His advice to experts is to stay positive, arguing that people in India have been optimistic they have done well in the market over the last 20-25 years. In addition, being positive will help people find opportunities to buy rather than just sell in the market.

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