recession in america The global stock market is in turmoil due to the threat of recession. Major US indices – Nasdaq, S&P 500, and Dow Jones and major European markets, including UK’s FTSE, France’s CAC 40 and Germany’s DAX are witnessing a huge decline. Indian stock market benchmarks – Sensex and Nifty50 also fell sharply on Monday. Due to the huge decline in the Indian stock market, investors lost about ₹ 15 lakh crore in a single session. Meanwhile, the question arises whether the fear of recession in America is real? There are some signs of recession in the US economy. However, it is too early to think that America will face a recession soon. Traditionally, if the gross domestic product (GDP) of an economy remains negative for two consecutive quarters, it faces a recession.
According to data released by the US Bureau of Economic Analysis, the US GDP grew at a rate of 2.8 percent during the April to June quarter this year. The US growth rate is unlikely to go negative so soon. That is, the fear of recession in the US is not as much as it is in reality, as it dominates the market.
What should Indian stock market investors do?
Market experts say that the global markets will stabilize in the coming few sessions. Many consider this correction to be healthy for the Indian market, which was worried about high valuations. On the other hand, India benefits from the global economic slowdown. Oil prices fall due to economic slowdown in western countries. Since India is the third largest importer of crude oil globally, a fall in crude oil prices is positive for its economy as it improves the exchange rate and foreign exchange reserves and reduces the fiscal deficit.
Investors need not worry
Market experts say that Indian investors should not worry too much about the US recession. One should stay invested in good stocks. At the same time, one should invest in good stocks on decline. This is because whenever there is a fear of recession in America, oil prices fall badly. This is a big positive aspect for the Indian economy and market. Economic indicators are important, but the role of liquidity and valuation is often ignored in the market. The biggest reason behind this decline in global markets is high valuation and mismatch between liquidity and market capitalization. Except for the Chinese markets, the rest of the major markets in the world are at high valuation.
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