{"id":170,"date":"2020-01-15T08:47:42","date_gmt":"2020-01-15T08:47:42","guid":{"rendered":"https:\/\/www.invest19.com\/blog\/?p=170"},"modified":"2020-01-15T08:47:44","modified_gmt":"2020-01-15T08:47:44","slug":"major-factors-affecting-stock-market-in-india","status":"publish","type":"post","link":"https:\/\/www.invest19.com\/blog\/major-factors-affecting-stock-market-in-india\/","title":{"rendered":"Major Factors Affecting Stock Market in India"},"content":{"rendered":"
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A stock\nmarket is an ever-changing place where fluctuations are always around.  This dynamic nature of the stock market makes\nit an intriguing prospect to venture into. The thing about the stock market is\nyou cannot predict the future outcome every single time. And this ends up\nkeeping you awake with whether to invest in or not. But why does the stock\nmarket tend to be dynamic in nature? What influences them so much that they\nkeep on fluctuating? <\/p>\n\n\n\n

This blog tends to look at those factors that affect the Indian stock market and looks at the reasoning behind it.\u00a0 Read along. <\/p>\n\n\n\n

7 Major Factors Affecting Stock Market in India<\/h2>\n\n\n\n

Government Policies<\/strong><\/h3>\n\n\n\n

Economy and industries are often affected highly by government policies.\nThe government tends to implement new policies in regard to the economic\ncondition of the nation. Any new change in policy can create a highly\nprofitable scene for the economy or tighten the grip around. This creates a\npossibility of the stock market being affected due to any change or launch of\ngovernment policy. The increase in corporate taxes impacts the industry severely\nas their profits will take a hit and simultaneously the stock price will\nplunge. Similarly, markers like fiscal policy also impact the share market as\nit has a major role to play in the financial bearings of the industry. You can\ntake into consideration the interest rates, whenever the interest rates go up,\nbanks raise the lending rates which tend to increase the cost for corporate and\nindividuals alike. The rising cost will tend to create an impact on the profit\nlevels affecting the stock prices of the company. Similarly, for the\nindividual, the rising cost will create a dent in the pocket decreasing the purchasing\npower of the consumer. The way automobile and real estate sectors were affected\nis a testament to it. <\/p>\n\n\n\n

Add to it the debt market scene where the bonds yields are getting lower by the day. This creates a contagion effect on the stock market where investors may look to pull out of their investments. People tend to deem the debt market safer than equity ones. And when the debt market tends to fluctuate, investors tend to stay put from investing in markets altogether. This may also create an indifferent relation wherewith the declining NAV in the government bond yields, people may shift from the debt investment to investing in stocks. Furthermore, when the government increases the bond rate, the bonds of the previous issue tend to be of lower value and people who will look to offload their bonds by selling will generate less value in return. that may shift their stance from opting for bonds to the stock market. <\/p>\n\n\n\n

Monetary and Regulatory Policies <\/strong><\/h3>\n\n\n\n

Reserve Bank of India (RBI) is the apex body which regulates the monetary policy in India. RBI tends to bring different monetary policies as regards to the economy of the nation. One such step is the revision in the repo rate from time to time based on their view towards inflation. This change impacts the loan rates and the interest rates in the market. When the loan rates decrease, then the expenses on the consumer level will decrease allowing people to invest in the stock market. \u00a0<\/p>\n\n\n\n

Similarly, the Securities and Exchange Board of India (SEBI) keeps a guard on the stock market ecosystem. They launch a mandate regarding the stock market to regulate trading. The recent crackdown on the fraudulent brokers added with the announcement of the stop on margin trading; tends to create a ripple effect on the market. The investors may look to equity shares with an air of caution when the SEBI regulatory announcements come in. <\/p>\n\n\n\n

Currency Strength <\/strong><\/h3>\n\n\n\n

Currency defines the economy of the nation. The exchange rates are a\nmarker to check the currency strength of a nation. The exchange rates between\ndollars and rupee showcase the strength of the Indian currency across the global\neconomy. Any fluctuations in the rate will create an impact on the finance\nmarket. And when that happens a multi-chain impact is created on. There are\nplenty of Indian companies who have an overseas connection and conduct business\nwith foreign companies. Companies that depend on foreign trades tend to go\nthrough cycles of change. For say, if the rupee tends to be strong, then that\nwill mean lower sales invoices for the company dealing with payments in dollars\ndecreasing their net profit and ultimately creating a dent in the stock value\nof the company. Meanwhile at the same time imports do get cheaper though and\npeople will have more to spend for allowing them to partake into investment in\nthe share market. <\/p>\n\n\n\n

Taking into same when the rupee tends to perform badly against the dollar, the imports will tend to be expensive and it will severally impact the purchasing power of the individual stopping them from venturing into investing in the share market. In the meantime, the sales invoice will get higher value for those dealing with foreign companies and their profit levels will increase. <\/p>\n\n\n\n

Economic Indicators<\/strong><\/h3>\n\n\n\n

There are various economic indicators that affect the overall economy of\nthe nation ultimately creating an impact on the financial market. The major of\nthe lot is oil prices which are detailed by the OPEC data and GDP. The markers\nlike OPEC data allow for a detailed analysis of the future happenings on the\noil market. For a nation who is dependent on imported oil, any change in price\nis likely to create a dent in the nation\u2019s economy. The movement of oil prices\nis one of the key determinants of the stock market. As and when the prices\nrise, the expense tends to rise to create a hit for the buyers. That will lower\ntheir ability to invest in the market due to hit rendered by the increased oil\nprices.  <\/p>\n\n\n\n

Similarly, Gross Domestic Product (GDP) is the marker for the nation\u2019s economy. It looks at the aspect of total economic production of the country and its overall economic health. It helps to showcase the economic developments and the future direction of the market. A healthy GDP status will directly create an impact on the financial markets and investment. <\/p>\n\n\n\n

FII and DII<\/strong><\/h3>\n\n\n\n

Foreign Institutional Investors (FIIs) and Domestic Institutional Investors (DIIs) tend to impact the stock market very much. As they tend to have a prominent role in the stocks of the company, their entry or exit will create a huge footprint in the equity market and will impact the stock prices. <\/p>\n\n\n\n

Natural Disaster<\/strong><\/h3>\n\n\n\n

Natural disasters tend to create a chaotic situation in life. These natural disasters tend to hamper the lives and the market equally. It impacts the company\u2019s performance and the capacity of people to spend the money. This will lead to lower levels of consumption, lower sales and revenues ultimately denting the company\u2019s stock profile. <\/p>\n\n\n\n

Political Aspect<\/strong><\/h3>\n\n\n\n

Speaking\nof political impact, factors like election, budget, government intervention,\nstability, and other factors affect the economy and the financial markets\nhugely. The political events and further announcements like budgets tend to\ncreate tremendous levels of volatility in the market influencing the stock\nmarket deeply. The same has been seen plenty of times over the period with the\ncases like elections and riots where the market has taken a hit quite a lot. <\/p>\n\n\n\n

The stock market tends to go through various cycles depending\non the influencing factors. These factors tend to affect the shares market and\nmay abruptly change market trends. The aforementioned factors have a prominent\nrole in defining how the stock market functions ultimately impacting the\ninvestor\u2019s willingness to venture into the stock market. <\/p>\n

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