by The Indian share market has a strong relationship with the financial sectors. In finance, macroeconomic variables can affect the stock market returns. However, the Arbitrage Pricing Theory shows that these returns are affected by several economic variables. Therefore, both factors are interdependent.
According to common knowledge, as the prices of commodities increase, the traders have a limited amount of discretionary income to invest. Therefore, venturing into this highly volatile market is a risky business.
As one cannot predict the future stock market performance, people are hesitant to trade. To make things easier and analyse the stock market data today, one must remember that trading largely depends on demand and supply.
If you are a trader looking for investment opportunities in the Indian stock market, this guide will help you. We will explore the reasons behind the dynamic nature of the share market and gain insights into its volatility. So join us as we discuss the key factors affecting the Indian stock market.
The Reserve Bank of India and the Securities and Exchange Board of India play a vital role in the stock market’s volatility. SEBI regulates and supervises various aspects of the financial market and ensures fair and transparent trading practices. It also monitors investors and enforces rules to protect their interests.
When the economy of a country prospers, the cyclical stocks do well. However, during recessions, cyclical stocks suffer more than non-cyclical stocks. Apart from this, the growth or contraction of GDP impacts how the market performs. Therefore, it is essential to keep a close eye on such indicators so that you can develop swift strategies to respond to such changes.
The central bank has a major influence over the stock markets. If there is an upward movement in interest rates, there will be a surge in loan interest. Thus, this will make it less attractive for entrepreneurs to increase their investment. Conversely, if the interest rates fall, the businesses will be intrigued to invest.
Therefore, the financial market is inversely proportional to the banking system. Before investing, analyse the Indian stock market today and make an informed decision.
Foreign exchange or forex fluctuations are important in the Indian stock market. Foreign investments and Indian Rupees are indirectly proportional to each other. When one strengthens, the other becomes weak.
Apart from this, alterations in the exchange rates can influence the profitability and competitiveness of businesses engaged in international trade. This impacts their stock prices and dividends.
While investing during such phases, it is important to invest in companies with better currency risk management and a global presence, as they may be well-equipped for such situations.
Driven by emotions, Indian investors make significant changes in market movements. A positive sentiment can surface as a higher demand for stocks, which causes the prices to surge. Similarly, negative sentiment can lead to panic selling, which decreases the value of assets. However, if you are an investor planning to grow your assets, be sure to check out Research 360 to know if today’s share market is open.
With the rise in inflation, consumers may have a limited ability to spend, leading to lower company profits. As the profits decrease, the Indian stock market dwindles. In such circumstances, investors become uncertain about the future value of their assets, which leads to conservative investment behaviour. Other sectors, such as the technology industry, may also be negatively impacted while the real estate sector booms.
During the liquidity crisis, the prices of stocks fall drastically. Therefore, an asset is subject to liquidity risk, and risk-averse investors generally require better-expected returns as reimbursements.
In conclusion, we can say that due to the dynamic nature of the Indian share market, investors must be thoroughly acquainted with trading. With Motilal Oswal’s Research 360, you can gain significant insights into stocks and their performance. It provides research, recommendations and education related to the stock market so that you can make informed decisions before investing and generate magnificent returns.
