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10 Incidents That Prove Global Events Impact Indian Markets to a Great Extent

05 Sep 2014 |By: Surbhi Kataria

10 Incidents That Prove Global Events Impact Indian Markets to a Great Extent

The Indian capital market is not insulated from the global markets.  On the contrary, to a large extent, events in the global markets, with emphasis on what happens on the Wall Street do impact the Indian stock market.

Although this is regarded as a thumb rule by the market operators, there have also been sporadic instances when the Indian markets brushed aside Wall Street and continued to maintain the uptick. This trend has been more pronounced during the 2nd half of 2014 when the Indian political equation changed dramatically and a stable government was elected to power. Ever since, the Indian indices have remained in the robust territory barring an occasional jerk or two.

The following are among the major events in the recent past that have significantly impacted the capital market.

1. Confrontations

For those who are actively following the stock markets, the impact of the Ukraine crisis and the Gaza scare were pronounced, but thankfully were short-lived.

2. Political upheavals

In the middle of 2013, political upheavals in the Euro zone region brought down the global stock markets and the Indian markets joined the sell off bringing the sensex down by nearly 300 points.

The Ukraine crisis in early 2013 too impacted the Indian stock market though the domestic political stability helped the indices from taking a deep plunge.

3. Oil prices

The 2008 economic meltdown stands as a good pointer to how the global oil prices impact the Indian stock market.

4. Currency volatility

The Indian rupee has been holding relatively steady at around Rs.60 to a dollar for most part of 2014. Though the Reserve Bank of India monitors the currency closely, and holds the rates through market intervention when needed, any major shift in the policies of the US Federal Bank can alter the situation.

5. FIIs (Foreign institutional investors)

Foreign institutional investors play a key role in the emerging markets.  Much of the market stability that we are seeing in the second half of 2014 is attributable to the continuing confidence reposed in the Indian markets by this segment.

Read More: FIIs stood as net buyers in equities as per September 04 data: NSDL 

6. Bullion markets

The Bullion markets have remained rather subdued all through 2013, registering a fall of nearly 23% during the year.  Any flight of capital to the ‘safe haven’ that gold is reckoned to be, will negatively impact the Indian stock markets.  However, in recent times, gold is perhaps loosing some sheen as a safe haven investment.

Read More :Gold futures edge lower as US Dollar Index rallies

7. Natural calamities

Although the world has witnessed fewer natural calamities of large magnitude in recent times, some of these events like the US hurricanes  are unpredictable and will impact the global capital markets.

8. The  QE taper

The quantitative easing program launched by the US government to address the impact of the Economic meltdown 2008 is tapering out. When the QE program winds down, the FED is more likely to push up the interest rates leading to cheap money drying up. This in turn will impact the FII exposure in the Indian markets.

9. Terror attacks

Terror attacks in any part of the globe will affect the capital markets and the impact could be felt in the Indian stock markets too.

10. Sovereign ratings

S&P or the Standard and Poor provide sovereign ratings for different global markets based on risk perception associated with investment. Any upward/downward movement in the ratings will have an impact on the Indian capital market.

Event driven volatility however tends to be short lived and the markets often swing back to its inherent dynamics. Taking a balanced view of the commentaries on the events will help you with informed decisions.

Let us know what you think of the article by commenting in the section below.

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