Will Ceasefire & FPI Inflows Lift Markets this Week?
Last week was a tumultuous one for Indian markets, with the Sensex plummeting by a whopping 1,047 points. The tensions in Ukraine and the subsequent sanctions imposed by the US and its allies were the primary causes of the market volatility. However, as the world breathes a sigh of relief with the announcement of a ceasefire, markets may be poised to rebound this week.
In this post, we will explore the factors that could lead to a market recovery and the implications it may have on the economy.
FPI Inflows: A Boon for Markets
Foreign Portfolio Investors (FPIs) have been net sellers of Indian equities for quite some time now. However, with the ceasefire announcement, there is a high probability that FPIs will start returning to the Indian market. A report by The Core suggests that markets are set to edge up on ceasefire moves. The article quotes a market expert as saying, “The ceasefire is expected to ease tensions in the global markets, which may lead to a resurgence in FPI inflows.”
FPIs have been a crucial factor in driving Indian markets in recent years. Their inflows have helped to propel the Sensex to new highs, and their outflows have led to significant corrections. Therefore, if FPIs start returning to the market, it could be a major boost for the Indian equities.
Strong Q4 Results: A Silver Lining
Despite the market volatility, many Indian companies have reported strong Q4 results. This has been a silver lining for the market, as it suggests that the economy is still growing robustly. The Q4 results have been particularly impressive in the sectors such as banking, automobiles, and consumer goods.
The strong Q4 results have also led to an increase in the earnings per share (EPS) of many companies. This has resulted in a higher price-to-earnings (P/E) ratio, which is a key indicator of the market’s value. A higher P/E ratio indicates that investors are willing to pay more for each rupee of earnings, which is a sign of confidence in the market.
Easing Tariffs: A Positive Sign
The easing of tariffs between the US and India is another positive sign for the market. The reduction in tariffs will lead to an increase in trade between the two countries, which will have a positive impact on the Indian economy. The easing of tariffs will also reduce the uncertainty in the market, which is likely to lead to an increase in investor confidence.
Travel and Tourism: A Sector in Need of Recovery
The travel and tourism sector was hit hard by the tensions in Ukraine. The sector has been one of the hardest hit by the conflict, with many tourists cancelling their plans to visit India. However, if the ceasefire holds, the sector may start to recover. The recovery of the travel and tourism sector will have a positive impact on the Indian economy, as it is a significant contributor to the country’s GDP.
Currency and Reserves Data: A Cautious Optimism
The currency and reserves data also point to cautious optimism. The Indian rupee has been strengthening against the US dollar in recent days, which is a sign of increased investor confidence. The country’s foreign exchange reserves have also been increasing, which is a sign of the government’s ability to manage the economy.
In conclusion, while the Sensex may have fallen by 1,047 points last week, there are several factors that could lead to a market recovery this week. The ceasefire announcement, strong Q4 results, easing tariffs, and the recovery of the travel and tourism sector are all positive signs for the market. Additionally, the currency and reserves data point to cautious optimism. Therefore, it is likely that markets will rebound this week, and investors may start returning to the Indian equities.
Source:
https://www.thecore.in/podcasts/markets-set-to-edge-up-on-ceasefire-moves-835131
