Will Ceasefire & FPI Inflows Lift Markets this Week?
The Indian stock market witnessed a significant downfall last week, with the Sensex plummeting by 1,047 points. However, amidst the gloom, there are signs of hope on the horizon. A ceasefire in the ongoing border tensions between India and Pakistan, as well as a potential inflow of Foreign Portfolio Investors (FPIs), may help lift the markets this week.
In this article, we will delve into the reasons behind the market volatility, the impact of the ceasefire and FPI inflows, and what investors can expect in the coming days.
Reasons behind Market Volatility
The Indian stock market has been on a rollercoaster ride in recent weeks, with the Sensex declining by over 5% in the last two trading sessions. The primary reason behind this volatility is the ongoing border tensions between India and Pakistan. The tensions escalated after a suicide bombing in Pulwama, Kashmir, which led to a series of military strikes by India.
The market was also affected by the recent decline in global markets, particularly in the United States. The Dow Jones Industrial Average fell by over 1% last week, which had a ripple effect on the Indian market.
Impact of Ceasefire on Markets
The news of a ceasefire between India and Pakistan has brought some respite to the market. The ceasefire came into effect on February 26, after Pakistan Prime Minister Imran Khan announced that his country was willing to make peace efforts.
This development has led to a significant reduction in market volatility, with the Sensex gaining over 250 points on February 27. The ceasefire has also led to a decline in gold prices, which had been rising in anticipation of further market volatility.
FPI Inflows and Their Impact on Markets
FPIs have been significant players in the Indian stock market, with their investments contributing to a large portion of the market’s growth. However, their recent withdrawal from the market has led to a decline in market sentiment.
According to the latest data, FPIs have withdrawn over $1 billion from the Indian market in the last two weeks. This withdrawal has led to a decline in market capitalization, which has been a major concern for investors.
However, with the ceasefire in place, there is a possibility that FPIs may return to the market. The Indian government has taken steps to ease regulatory norms for FPIs, which may lead to an influx of new investors.
Other Factors Affecting Markets
Besides the ceasefire and FPI inflows, there are several other factors that may impact the Indian stock market this week. Some of the key factors include:
- Q4 Results: Several Indian companies are set to announce their Q4 results this week. Strong results may lead to a rebound in market sentiment, while weak results may lead to further declines.
- Easing Tariffs: The Indian government has taken steps to ease tariffs on several goods, which may lead to an increase in consumption and economic growth.
- Currency and Reserves Data: The Reserve Bank of India (RBI) is set to release currency and reserves data this week. A decline in reserves may lead to concerns about the country’s ability to defend its currency, while a rise in reserves may lead to an increase in market confidence.
Investor Sentiment
Despite the decline in market sentiment last week, there are signs of cautious optimism among investors. The Indian rupee has strengthened against the US dollar, which may indicate that investors are becoming more confident in the country’s economy.
The travel and tourism industry, which was hard hit by the border tensions, may also recover if calm holds. The industry has been a major contributor to India’s economic growth, and a recovery may lead to an increase in consumer spending.
Conclusion
The Indian stock market is likely to rebound this week, driven by the ceasefire between India and Pakistan, as well as potential FPI inflows. While the Q4 results and easing tariffs offer hope, investors should remain cautious and keep a close eye on currency and reserves data.
The travel and tourism industry may recover if calm holds, which could lead to an increase in consumer spending. Overall, the Indian stock market is expected to edge up this week, but investors should be prepared for any unexpected twists and turns.
News Source:
https://www.thecore.in/podcasts/markets-set-to-edge-up-on-ceasefire-moves-835131
