Will Ceasefire & FPI Inflows Lift Markets this Week?
Last week was a tumultuous one for the Indian stock market, with the Sensex plummeting by a whopping 1,047 points. The sharp decline was largely attributed to the ongoing border tensions between India and Pakistan, which led to a flight of foreign portfolio investors (FPIs) from the market. However, with the news of a ceasefire agreement between the two nations, markets may rebound this week, buoyed by the return of FPIs and a reduction in tension.
In this blog post, we’ll take a closer look at the factors that could lift the markets this week and the implications of the ceasefire on the economy.
Q4 Results to Boost Sentiment
Despite the recent market volatility, many Indian companies have reported strong Q4 results, which could help boost sentiment this week. Companies such as Hindustan Unilever, Asian Paints, and Bajaj Auto have all posted robust earnings, indicating a resilient economy. These positive results could help attract FPIs back into the market, which would be a significant boost for the Indian stock market.
Easing Tariffs to Improve Trade Environment
Another factor that could lift the markets this week is the easing of tariffs. The Indian government has been working to reduce trade tensions with the United States, and the recent announcement of a potential trade deal between the two nations has improved the trade environment. A reduction in tariffs would make Indian exports more competitive, which could lead to an increase in foreign investment and a boost to the economy.
Travel and Tourism to Recover
The travel and tourism industry was one of the hardest hit by the recent market volatility, with many tourists cancelling their trips to India due to the tensions with Pakistan. However, if the ceasefire holds, the industry could recover quickly. India is a popular tourist destination, and the government’s efforts to promote tourism, such as the “Incredible India” campaign, could pay off in the coming months.
Currency and Reserves Data Point to Cautious Optimism
The Reserve Bank of India (RBI) released data last week showing that the country’s foreign exchange reserves had increased by $1.4 billion to $417.6 billion. This increase was largely driven by a surge in foreign portfolio investments, which suggests that investors are becoming more confident in the Indian economy. Additionally, the Indian rupee has stabilized against the US dollar, which could indicate a reduction in currency risks.
FPI Inflows to Resume
The news of a ceasefire agreement between India and Pakistan has led to a significant improvement in investor sentiment, and FPIs are likely to return to the market this week. In fact, data from the Securities and Exchange Board of India (SEBI) shows that FPIs sold Indian equities worth $1.3 billion last week, but the pace of selling slowed significantly towards the end of the week. With the tensions easing, FPIs may resume their buying activity, which could lead to a rebound in the markets.
Conclusion
While last week’s 1,047-point fall in the Sensex was a significant setback for the Indian stock market, the news of a ceasefire agreement between India and Pakistan could be the catalyst for a rebound. Strong Q4 results, easing tariffs, and recovering travel and tourism industry could all contribute to a lift in the markets this week. Additionally, the currency and reserves data point to cautious optimism, and FPI inflows may resume in the coming days. With the Indian economy showing signs of resilience, investors may want to consider taking a contrarian view and buying into the market this week.
Source:
https://www.thecore.in/podcasts/markets-set-to-edge-up-on-ceasefire-moves-835131
