The stock market has witnessed considerable volatility over the past fortnight. From 81,867 on August 1, the Sensex fell to 78,593 on August 6, before recovering to 80,436 by August 16. While investors have weathered the recent bout, they should be prepared for similar episodes in the future.
A rapid appreciation of the yen in early August triggered a global sell-off. “Investors borrowed yen at Japan’s low interest rates and invested in higher-yielding assets abroad. However, as concerns that the Bank of Japan may tighten stance emerged, the yen began to strengthen. This led to an unwinding of some carry trades, causing sharp corrections,” says Manuj Jain, associate director, co-head product strategy, WhiteOak Capital Mutual Fund.
