The global community of investors is now taking the Indian capital markets seriously after several years and for good reasons too. The fiscal 2014 – 2015 gave institutional investorstidy returns and the next fiscal is expected to be stronger. It is a case of money chasing money and various studies point to emerging markets as a desirable destination for investors rather than established markets. But, even with some of the emerging markets performing exceptionally well with India leading by example, simmering global events can potentially take away the sheen from the global capital markets and India cannot remain wholly insulated from this possibility. The following are among the major threats that investors should track with agility.
The European Union
The European Union is beset with problems and the Greece crisis is all but over. The upcoming elections in the United Kingdom could potentially turn out to be a referendum on its EU membership. The Russian economy has been rattled by the recent drop in oil prices and her engagements with Ukraine is another area of concern although many experts opine that cosmetic treatments would be applied at intervals to prevent the issue from snowballing into a larger regional crisis.
The Eurozone in general is like a plane flying low and hitting air pockets constantly. The occasional lifts coupled with brush with death experiences accentuate the worries. A rate hike by Bank of England supported by solid growth in the UK is on the cards, while a falling euro faces the prospect of enhanced monetary stimulus to support European credit sectors and equities.
The IS movement
The IS movement appears to be gaining strength with each passing day. Large parts of Iraq, Syria, Nigeria, and other pockets in the Middle East and Asia are now under the control of the IS. The movement is known for the use of brute force and inhuman acts to enforce supremacy. Added to this they are funded comfortably with constant additions from oil sales from the captured wells in Iraq and some of the other Middle East regions.
Climate change is already impacting many parts of the world. The Indian economy is significantly dependent on a normal monsoon. Untimely rains can deal a body blow to the agricultural sector while scanty rain fall is another potential threat to reckon with. Given the fact that both these conditions cannot be merely wished away, potential threats to the Indian stock markets need be factored in while making investment decisions.
The Indian capital markets are today riding a high wave of positive signals and one can only hope that the global events do not mar the current projections of a high growth cycle with resultant profits. For now, cautious optimism is the way to go and constant updates on the underlying threats can potentially keep investors insulated to a large extent.
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