Will Ceasefire & FPI Inflows Lift Markets this Week?
Last week’s sell-off in the Indian markets was unprecedented, with the Sensex plunging by a whopping 1,047 points. The news of a possible ceasefire in the Ukraine-Russia conflict and a jump in Foreign Portfolio Investors (FPI) inflows have, however, raised hopes of a market rebound this week.
In this blog post, we will delve into the details of what led to the market downturn and what factors are likely to influence market sentiment this week. We will also explore the impact of the ceasefire on the travel and tourism industry, which was severely hit by the tensions.
Market Downturn: What Went Wrong?
The last week’s market downturn was largely driven by the escalation of the Ukraine-Russia conflict, which led to a massive sell-off in global markets. The Indian market, which has historically been affected by global events, was not immune to the turmoil.
Other factors that contributed to the sell-off include:
- Global Growth Concerns: The ongoing pandemic and the war in Ukraine have raised concerns about global growth, leading to a decline in investor sentiments.
- Inflation Fears: Rising inflation and interest rates in the US have led to a strengthening of the dollar, making it more expensive for foreign investors to invest in Indian markets.
- Domestic Issues: The Indian market was also affected by domestic issues, including the ongoing farmer protests and the government’s decision to increase the excise duty on fuel.
Ceasefire and FPI Inflows: A Silver Lining?
Despite the gloomy market scenario, there are signs that the market may rebound this week. The news of a possible ceasefire in the Ukraine-Russia conflict has led to a surge in FPI inflows, which could support the market.
FPI inflows are critical for the Indian market, as they provide much-needed capital to the market. In recent weeks, FPIs have been net buyers of Indian equities, which has helped to support the market.
The ceasefire, if it holds, could also lead to a reduction in global tensions, which could lead to a rebound in investor sentiments. This, in turn, could lead to a rise in the market.
Travel and Tourism: A Hit, But Recovery Possible?
The travel and tourism industry was severely hit by the tensions, with many countries imposing travel restrictions and advisories. The industry, which is a significant contributor to India’s GDP, was expected to suffer significantly due to the downturn.
However, if the ceasefire holds, the industry could recover faster than expected. Many countries have already started to lift travel restrictions, and if the situation normalizes, the industry could see a strong rebound.
Currency and Reserves: Cautious Optimism
The Indian rupee has been under pressure due to the tensions, but the recent surge in FPI inflows has helped to strengthen the currency. The Reserve Bank of India’s (RBI) decision to intervene in the foreign exchange market has also helped to stabilize the currency.
The country’s foreign exchange reserves have also been boosted by the FPI inflows, which has led to cautious optimism about the currency’s prospects.
Conclusion
While the last week’s market downturn was unprecedented, the news of a possible ceasefire and FPI inflows have raised hopes of a market rebound this week. The travel and tourism industry, which was severely hit by the tensions, could recover faster than expected if the situation normalizes.
The Indian rupee and foreign exchange reserves have also been boosted by the FPI inflows, which has led to cautious optimism about the currency’s prospects.
As we move forward, it will be crucial to monitor the developments in the Ukraine-Russia conflict and the FPI inflows to gauge the market’s sentiment. If the ceasefire holds and FPI inflows continue, we could see a strong rebound in the market.
News Source:
https://www.thecore.in/podcasts/markets-set-to-edge-up-on-ceasefire-moves-835131
