Bears are roaring and Bulls are crying.... Here are some reasons which have led to fall in the global markets...The Global Markets are very jittery..and hence has led to the the withdrawal of large amount of funds from the Global Markets...Here are some reasons for sudden downturn in the global markets, ..
Plzzz do not take any domestic circumstances for Market corrections and jump on the conclusion....expect recent political crisis......The market has corrected savagely because of the SUB PRIME crisis in the U.S Economy and the fear of downturn and recession in the American Market, ....The Rise in the Interest rates in U.S economy has led to the defaults by the debtors(lonee)...
When Interest rates were low in the economy then the Financial Institutions like Lehman Bros. Ltd. , Blackstone, Citygroup Inc. etc. disbursed a huge amount of loans to the people.And a large portion of these loans were given to the buyers of property in the Sub Prime region in U.S.When Interest rates Started to inch up (due to rising inflation in U.S), the emi(i.e monthly installments) started rising and as a result of this the people were unable to pay back the loans earlier taken by them and hence a sudden liquidity crunch was witnessed in the U.S economy.And hence the prices of the real estate have started to decline by around 8-9 %.When huge financial institutions were unable to get back the loans earlier disbursed, fear of their Bankruptcy arose.
It came into limelight when CITIGROUP Inc. , one of the major lenders in U.S, warned the wall street of its possible bankruptcy. It pulled down the U.S markets and panic was witnessed among the investors their.
Hence investors started to withdraw their money from the mutual funds (both real estate funds and the Global Emerging markets fund) and hence the FUND HOUSES and the FII’s started to sell their securities in the GLOBAL MARKETS and in INDIA AS WELL. This Sudden Withdrawal of money lead to Sharp decline in the Indian Markets.But now it seems that these conditions have started to fade away as ECB and FEDERAL RESERVE injected billions of $ in the system.
It was Also eased by th recent discount window rate cut by the FEDERAL RESERVE in U.S.It has helped to ease the liquidity crunch in the U.S economy.