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Last Updated Saturday August 18 2018 08:28 AM IST

Battle cries spook equity markets. Should the investor be worried?

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Wall Street A souvenir license plate is seen outside the New York Stock Exchange in Manhattan, New York. Reuters

Kochi: The battle cries from Washington and Pyongyang have pulled down the equity markets from their record highs. Investors found themselves poorer by Rs 7 lakh crore in just five days.

Stock markets around the world crashed on fears that the war of words between the United States and North Korea could escalate into a nasty war. Indian markets were comparatively less affected by the standoff though. Equity value has slumped by about Rs 75 lakh crore in the global market.

Foreign institutional investors (FIIs) led the sell-off in India in light of the tensions. FIIs pulled out Rs 1,943.86 crore from the Indian market on Friday alone as they sought out safe haven investments.

The military escalation on the India-China border has not helped the market either.

Regulatory action also contributed to the slide in equities. The Securities and Exchange Board of India has put curbs on transaction of the shares of 331 companies, dealing a heavy blow to tens of thousands of retail investors. The SEBI wanted to flag the companies suspected to be shell entities but ended up punishing the ordinary investors.

Analysts say that the markets were heading for a correction anyway. The macro reasons provided a trigger for the long pending corruption.

“A correction was due in the equity markets for long. That just got delayed for some reason. Now the threat of war has made a correction inevitable. But the investors have no reason to panic with the current slide. Stock markets continue to be the best option for asset creation,” said Sudeep Bandopadhyay, chairman of Inditrade Group.

The global tension has increased the demand for safe-haven assets such as gold. Gold price has gone up by Rs 640 per sovereign in the last one week. Gold now stands at Rs 21,760.

Meanwhile, the benchmark Sensex has slid by 1111.82 points to 31,213.59. Nifty fell 355.60 to 9,710.80.

The rupee also fell. Rupee’s exchange rate against the dollar is now 64.13. The rupee has lost 55 paise after a month-long climb.

The dollar, however, is at a two-month low against Japanese yen. The Japanese currency is seen more safe in the backdrop of the North Korea crisis.

Read more: Business | Markets | WPI inflation rises sharply to 1.88% in July

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