Will Ceasefire & FPI Inflows Lift Markets This Week?
The Indian markets experienced a rollercoaster ride last week, with the Sensex plummeting by a staggering 1,047 points. The sharp decline was attributed to the heightened tensions between India and Pakistan, which led to a sense of uncertainty and fear among investors. However, amidst the chaos, there are signs that the markets may rebound this week, courtesy of a ceasefire and Foreign Portfolio Investors (FPIs) returning to the scene.
In this blog post, we’ll delve into the factors that could lift the markets this week and explore the implications of the ceasefire on the travel and tourism industry.
Ceasefire and Diplomacy
The ongoing tensions between India and Pakistan were a major concern for investors last week. The escalation of violence led to a significant decline in investor confidence, resulting in heavy selling pressure on the markets. However, on Friday, the Indian government announced a ceasefire along the Line of Control (LoC), which could be a positive development for the markets.
The ceasefire, which came into effect on Friday evening, has brought relief to the markets, and investors are hopeful that it will lead to a reduction in tensions and a more stable economic environment. The diplomatic efforts between the two nations are also a positive sign, as it indicates a willingness to engage in dialogue and find a peaceful solution to the conflict.
FPI Inflows and Q4 Results
Another significant factor that could lift the markets this week is the return of FPIs. Despite the recent volatility, foreign investors have been net buyers of Indian equities, and their participation could continue to support the markets. In the last week of February, FPIs had invested ₹14,600 crore in Indian equities, which was the highest weekly inflow since November 2019.
The strong Q4 results announced by Indian companies are also expected to support the markets. The results, which were largely positive, indicate that the Indian economy is gradually recovering from the slowdown. The earnings growth, despite being moderate, is a positive sign, and it could lead to increased investor confidence.
Travel and Tourism Industry
The travel and tourism industry has been one of the hardest hit sectors in the ongoing tensions between India and Pakistan. The industry, which is a significant contributor to India’s economy, has seen a sharp decline in bookings and cancellations. However, if the ceasefire holds and tensions ease, the industry could recover quickly.
The Indian government has already announced several measures to support the industry, including the waiver of fees for visa applications and the relaxation of travel restrictions. These measures, along with the ceasefire, could lead to an increase in bookings and a recovery in the industry.
Currency and Reserves Data
The currency and reserves data released by the Reserve Bank of India (RBI) last week also pointed to cautious optimism. The foreign exchange reserves, which had fallen to a three-year low in January, increased by $1.4 billion in the week ended February 28. The increase in reserves is a positive sign, as it indicates that the RBI has sufficient foreign exchange to meet any potential outflows.
The rupee, which had fallen to a record low against the dollar in the previous week, also showed signs of stability. The currency has been trading within a narrow range, indicating that investors are becoming more optimistic about the economy.
Conclusion
In conclusion, the Indian markets may rebound this week courtesy of a ceasefire and FPI inflows. The strong Q4 results, easing tensions, and cautious optimism in the currency and reserves data also point to a potential uptick in the markets. However, the travel and tourism industry may take some time to recover, and investors should keep a close eye on developments in this sector.
As the markets navigate the challenges posed by the ongoing tensions, investors should focus on the fundamentals and not get swayed by short-term volatility. The Indian economy is gradually recovering from the slowdown, and the recent developments could be a positive sign for the markets in the long run.
Source: https://www.thecore.in/podcasts/markets-set-to-edge-up-on-ceasefire-moves-835131
