As we move ahead in the year 2019, it’s all about the stock markets. The stock markets have given steady returns over the past few years. This is not to say the stock markets didn’t face challenges. There were plenty of hurdles and the stock markets overcame them.
You have the trade war of USA vs China, the NBFC crisis because of the IL&FS fiasco and the DHFL credit rating downgrade to default, the Yes Bank stock price crash and NPA problems in the banking sector.
Now let’s take a look at the key factors which could impact the stock markets in 2019. Want to know more on Investment Planning? We at IndianMoney.com will make it easy for you. Just give us a missed call on 022 6181 6111 to explore our unique Free Advisory Service. IndianMoney.com is not a seller of any financial products. We only provide FREE financial advice/education to ensure that you are not misguided while buying any kind of financial products.
Take a look at BSE Sensex and Nifty 50. The Sensex rose by around 17% and Nifty 50 rose by 15% in the financial year 2019.
The RBI has cut the repo rate by 25 basis points from 6% to 5.75%. This was done in the June Monetary Policy Review meet. The RBI had also previously cut repo rates twice in the year 2019 by 25 basis points each. What’s different this time is the stance. RBI has changed the stance from “neutral” to “accommodative”. An accommodative monetary policy means more repo rate cuts could follow.
What happens on a repo rate cut? Well, interest rates especially home loan interest rates go down. This boosts consumption in the economy. People avail home loans and car loans to buy dream homes and cars. This boosts real estate and the auto sector in India. Investors of banking, real estate, auto and auto ancillary sector see a rise in stock prices.
See Also: Learn to make Money in the Stock Market
Rising tensions in the Middle East are pushing up crude oil prices. Crude Oil prices have spiked more than 4% in recent times after a couple of oil tankers were attacked in the Gulf of Oman. This follows strikes on tankers in the UAE and also oil-pumping stations in Saudi Arabia. The US is blaming Iran for these attacks.
The US sanctions on Iran is affecting oil exports of this country. This was done to rein in Iran’s nuclear ambitions. The OPEC is cutting crude oil production to boost crude oil prices. (OPEC or the Organization of Petroleum Exporting Countries is a permanent intergovernmental organization. The purpose of OPEC is to give steady income to oil producing nations and their investors. Fortunately, the US has raised its crude oil output.)
The US has threatened Mexico which is a major crude oil supplier with tariff imports. The US wants Mexico to substantially reduce the number of immigrants heading from Mexico to the US Southern Border. This has sent crude oil prices tumbling.
This is good news for India which imports 84% of crude oil needs. However, if US imposes tougher sanctions on Iran, crude oil prices could see a massive rise. This is bad news for the Indian economy. The stock markets in India are keeping a close watch on crude oil prices.
See Also: Indian Capital Markets
The Indian Debt market is going through tough times after the IL&FS crisis and the recent downgrade of DHFL debt to default. Debt mutual funds and FMPs have seen decreasing returns.
This is affecting returns in the stock markets. Investors are wary and are avoiding the stock markets or withdrawing from them. Sadly, this also means investors are running away from an asset class (equity) which has the potential to deliver inflation-beating returns.
The sweeping victory of the BJP in the 2019 elections has given the Government power to implement reforms. All eyes are on the Union Budget 2019 which would be in the month of July.
With the economy in the worst slowdown in the past 5 years, the Government would have to revive the economy and address the challenges affecting NBFCs, Banks, private investment and promote export revival and jobs. The equity markets are looking forward to a series of announcements which would be made by the Government in the upcoming Union Budget. This is expected to boost the economy and the infrastructure/affordable housing segment in India.
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