With the RBI’s announcement regarding the hike of the repo rate as well as the CRR ratio, it came as little surprise that the Sensex turned even more volatile in the previous week, and is currently in the 13,000 range. As hiked loan rates and interests on deposits start to kick in, there is hardly any respite for investors due to a multitude of factors influencing the markets in the last week. Both the Nifty and Sensex lost approximately 5 percent of their preceding values. Following is a list of points that investors should be well aware of in case they want to play it safe while investing in the stock market despite the shortcomings :

FII selling

The FIIs have been in a relentless mood lately and are showing no signs of being kind to the Indian markets, as they continued to pull out money from the stock exchange after having invested 18 billion in the domestic markets last year (which, incidentally, was the reason for their phenomenal rise). Clearly, the situation this year is going to be a lot different, with the rising inflation and unstable political situation causing further damage to the chance of a repeat heavy investment by the FIIs. All in all, it is a vicious circle, the FIIs won’t invest until the situation gets better, and one of the major contributors to the betterment of the situation is FII investment.

Rise in crude oil prices

How many times have we heard that before. But just for the record, the price has risen yet again, and is currently hovering around the 140 dollar mark. Since such a large deficit can’t be directly passed on to the customer, the government is incurring heavy losses due to bearing a portion of the fuel consumption cost of the masses, hence leading to further problems for the economy as a whole, since fuel is the heart of the entire transportation system, and is indirectly responsible for practically everything in our daily use.

Rise in commodity prices

Confirming to the earlier point, the pricing of basic commodities has a huge impact on the overall economic scenario of the country and consequently, the Sensex. While an increase in the CRR was expected by many, the increment of the repo rate has baffled all. While both these measures were to make sure that inflation comes down to more acceptable levels, increasing the repo rate would mean that the interest rates for loans would be further increased. Though adversely affect the demand scenario, which is somehow beneficial to curb the current inflation, it would do more harm than good as it would result in further downfall of the Sensex. Hence, investors should plan their strategy accordingly.

So that is the round up of markets this week for all those of you who might be thinking of investing into stocks. Please pay heed to the points mentioned above for better results.