Five reasons why markets cracked on Thursday

Now that markets have corrected sharply several investors are getting ready to grab the opportunity to catch stocks at lower prices.  Before investors firm up on buying decision it is worth knowing the exact reason why the markets fell on Thursday.

Rich valuations: -  The markets are trading at high valuations. Earnings never caught up in previous two years and the index as on October 13, is trading at 20.76 multiple higher than its long term average of 14 to 15 P/E multiple.

PSU banks NPA worry: -  The PSU banks NPA issue is yet not resolved with Vinod Rai coming hard on PSU banks for their lack of action on NPAs. Globally there are reports of big banks facing chronic problems and hence the banks may cause some further trouble. 

Geo political risks: -  With Putin making some aggressive statements on his intention to be at war if needed, the uncertainty in global financial markets has increased significantly.

US elections outcome: - US election outcome is crucial for global markets and Trump getting elected may send shivers in the equity markets. Indian equity markets will not be immune to the global developments as is reflected in today’s performance.

Fed red hike: -  With almost a definite US fed rate hike in the month of December, the global equity markets may react negatively including Indian equity markets. The global markets are reeling under pressure due to the developments in US economy even as the economy is all set to improve which may prompt interest rate hike which in turn is not good for stock price in short term.