A number of companies are listed on the stock market. The stocks of each company are traded multiple times each day. You can get information about different stocks, indices like nifty midcap50, nifty midcap100, nifty 200 etc on BankBazaar. Trading is dependent on a number of different conditions that change daily. On the whole, over the course of the financial year spanning 2017–2018, there was an increase of 12% on the S&P BSE SENSEX. There was an increase of 11% on the NIFTY50. It is hard to predict how the market will fare each day without a knowledge of the conditions that generally impact it. Here, some of the events that impacted the Indian stock market in FY18 are discussed.
Rate of inflation
Whether inflation increases or decreases, there will be a resulting effect on the market. Inflation is the situation in which the prices of common items increase rapidly. Since liquidity is one of the factors that affect the rate of inflation, the government might take action to reduce liquidity. Another way to reduce the rate of inflation is to increase the interest rates for loans. Increasing interest rates can cause a decrease in borrowings and this can have an impact on the economy. If inflation is high, then prices of day-to-day things that people buy will increase, leaving lesser amounts of money available for investments. In addition, along with inflation, the prices of stocks will also increase. Thus, inflation is not good for the stock market.
The Government of India announces a budget every year. The notifications regarding the budget are usually watched closely in order to know what changes are being announced and how it will impact the citizens. Depending on the announcement, there will be a close to immediate effect on the market. One of the announcements that had a huge effect on the market was the announcement of the taxes on long-term capital gains. That is, if a person has invested in shares over a longer period of time and their gains exceed a certain amount, then those gains would be taxed. This was not the case earlier. Once this announcement was made, there was an immediate reaction in the market and people started selling their stocks. This led to a fall in the market.
Global political changes
There were effects on the Indian stock market with two major political changes around the world. One was the election and inauguration of the French President Emmanuel Macron and the American President Donald Trump. Both of these elections had strong impacts on global markets and India was no exception.
Domestic political changes
The state and the general elections in India also have a solid effect on the stock market. This is because people bet against certain parties and how they plan to improve the fiscal situation in the state. Some governments may be favorable for industry and trade while other governments may not. Thus, there will be an effect on the stock market because of these.
Changes to public sector banks in India
The Reserve Bank of India (RBI) directed Indian public sector banks to reduce their Non-Performing Assets (NPAs) through the year. This is because NPAs are one of the biggest reasons why state-owned banks in India are losing money. NPAs are basically, non-performing assets or non-profitable accounts. Most commonly, these are accounts which have borrowed money from the bank but have not made the repayment. To this end, a number of reforms were introduced. Since some public sector banks suffer from a lower capitalization, the government funded a recapitalization scheme for the banks. This was rolled out in October 2017. Through this, the government plans to infuse over two lakh crore into public sector banks. This infusion will help the banks stabilize a little bit while ensuring that they are able to carry out the reforms suggested by RBI with regard to recovering NPAs.
IPOs in India
There were a number of Initial Public Offerings (IPOs) in the year 2017 in India. Over 120 companies went public. The total amount raised through IPOs was about Rs.70,000 crore. This was in direct contrast to the previous years when the amounts raised through IPOs was only half this amount. This was another major reason for changes in the Indian stock market. Avenue Supermarts, the company that owns D-mart, is one of the companies that benefited greatly during this time after an IPO.
One of the biggest events to had an impact on the market was the rollout of the Goods and Service Tax (GST). GST is one of the biggest tax reforms in Indian history. In order to make the tax rates common across the board, four different GST rates or slabs were introduced. Under this, the four slabs are of 5%, 12%, 18%, and 28% tax for different items and commodities. As of mid-month September 2018, petrol and diesel prices did not come under the GST. Once they too are brought under the common tax slab, another market upheaval can be expected.
Thus, we can see that there are a number of events that impacted the Indian stock market in the financial year spanning 2017–2018. Yet another factor that influenced the market was the change in crude oil prices. When global crude oil prices change, stock markets around the world react to it. In addition, factors like inflation, budgetary announcements, and changes to interest rates are all common and these occur frequently. The change in interest rates is regulated by RBI and the budgetary announcements are given out by the finance ministry. Inflation is monitored by RBI and the finance ministry. All announcements made by these institutions tend to trigger changes in the market. Knowing the events that can affect the stock market will help you in understanding how the markets react in the future. While the level of change cannot be predicted, it will help you understand if it is a mass panic or just a momentary change that will be offset by something else.
The contents of this page do not constitute financial or other professional advice nor does it imply in any manner a principal-agent relationship, and is not a professional advice on a specific financial matter.