Will Ceasefire & FPI Inflows Lift Markets this Week?
The Indian markets witnessed a significant downturn last week, with the Sensex plummeting by 1,047 points. The turmoil was largely attributed to the escalating tensions between India and Pakistan, which led to a sharp decline in investor sentiment. However, with the recent developments, including a ceasefire agreement and Foreign Portfolio Investors (FPIs) returning to the market, there is a growing optimism that the markets may rebound this week.
In this blog post, we will delve into the factors that could drive the markets higher and what investors can expect in the coming days.
Ceasefire Agreement and its Impact on Markets
The ceasefire agreement between India and Pakistan has brought a sense of relief to the markets, with the Sensex and Nifty indices bouncing back slightly on Monday. The agreement has eased tensions between the two nations, which had been rising following the Pulwama terror attack. The ceasefire agreement has not only brought calm to the border but also eased investor concerns, leading to a surge in buying activity in the markets.
FPIs Return to the Market
FPIs had been net sellers in the Indian markets for several weeks, with their net outflows reaching a staggering $10.6 billion in February alone. However, with the recent developments, FPIs have started to return to the market, with net inflows of $134 million in the first three days of the current week. This is a significant turnaround, as FPIs are known to have a significant impact on the Indian markets.
Strong Q4 Results
The Q4 results announced by various companies have been strong, with many beating analyst expectations. This has led to a surge in buying activity in the markets, with the Sensex and Nifty indices rising by over 1% each on Monday. The strong results have not only boosted investor sentiment but also led to a rise in the valuation of stocks.
Easing Tariffs
The easing of tariffs on imports from the United States has also boosted investor sentiment. The move is expected to reduce the cost of imports and lead to a rise in consumer spending, which is a significant driver of economic growth.
Travel and Tourism Sector
The travel and tourism sector was hit hard by the tensions between India and Pakistan, with many tourists canceling their trips to India. However, with the ceasefire agreement in place, there is a growing optimism that the sector may recover soon. The sector is a significant contributor to India’s GDP, and a recovery in tourist arrivals could lead to a rise in economic growth.
Currency and Reserves Data
The currency and reserves data released by the Reserve Bank of India (RBI) last week also point to cautious optimism. The country’s foreign exchange reserves rose by $1.5 billion to $428.5 billion, while the currency, the rupee, appreciated by 0.3% against the US dollar. The data suggests that the country’s foreign exchange reserves are stable, and the currency is not under significant pressure.
Investor Sentiment
Despite the recent developments, investor sentiment remains cautious. Many investors are still wary of the risks associated with the Indian markets, particularly the tensions between India and Pakistan. However, with the ceasefire agreement in place and FPIs returning to the market, there is a growing optimism that the markets may rebound this week.
Conclusion
In conclusion, while the Indian markets may have witnessed a significant downturn last week, the recent developments, including a ceasefire agreement and FPIs returning to the market, offer hope for a rebound this week. The strong Q4 results, easing tariffs, and currency and reserves data also point to cautious optimism. While investor sentiment remains cautious, there is a growing optimism that the markets may recover soon. As always, it is essential for investors to stay informed and do their own research before making any investment decisions.
News Source:
https://www.thecore.in/podcasts/markets-set-to-edge-up-on-ceasefire-moves-835131
