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Stock Market – Key Events and Their Impact on Markets

Stock Market – Key Events and Their Impact on Markets

In this article we will cover the major events that affected the stock market, the events that affected the stock market 2021, impact of monetary policy on indian stock market, major events in indian stock market history, upcoming events that can impact the stock market, impact of rbi monetary policy on stock market, impact of reverse repo rate on stock market and also major world events affecting financial markets 2021

Trading just on the basis of company-specific information may not be sufficient for a market player. It’s also crucial to comprehend the happenings that have an impact on the markets. Various external factors, such as economic and/or non-economic events, have a significant impact on the performance of stocks and markets in general.
We’ll try to figure out what’s going on with some of these occurrences, as well as how the stock market reacts to them. Policy on Money and Credit The Reserve Bank of India’s (RBI) uses monetary policy to control the money supply through manipulating interest rates. They do so by adjusting interest rates. The Reserve Bank of India (RBI) is the country’s central bank. Interest rates are established by the central banks of all countries across the world. The RBI must achieve a balance between growth and inflation while determining interest rates. In a nutshell, when interest rates are high, borrowing rates are also high (particularly for corporations).

How economy depends on Corporations to expand?

The economy slows down if corporations do not expand. Borrowing gets simpler when interest rates are low, on the other hand. This means that firms and consumers will have more money. More money means more spending, which means sellers are more likely to raise prices, resulting in inflation. The RBI must achieve a balance between growth and inflation while determining interest rates. In a nutshell, what is it? If interest rates are high, borrowing rates are likely to be high as well (particularly for corporations). Corporates can’t grow if they can’t borrow easily. The economy slows down if corporations do not expand. To achieve a balance, the RBI must analyse all considerations and set a few key rates with care. Any disparity in these rates has the potential to cause economic turmoil. The following are the major RBI rates to keep an eye on: What is the Repo Rate?

Banks can borrow money from the RBI whenever they need it. The repo rate is the rate at which the RBI loans money to other banks. If the repo rate is high, the cost of borrowing is also high, resulting in poor economic growth. The repo rate in India is now at 8%. The RBI’s decision to raise repo rates has angered the markets.

What is a reverse repo rate?

The rate at which the RBI borrows money from banks is known as the reverse repo rate. When banks lend money to RBI, they are certain that RBI will not default, hence they are more willing to lend to RBI than to a corporation. When banks choose to lend money to the RBI rather than to a business entity, the banking system’s money supply shrinks.

An increase in the reverse repo rate is bad for the economy since it reduces the amount of money available. Currently, the reverse repo rate is at 7%. What is the cash reserve ratio (CRR)? Every bank is obligated by law to keep funds with the RBI. The amount they keep is determined by the CRR. If the CRR rises, more money is taken out of the system, which is bad for the economy. Every two months, the RBI meets to discuss interest rates. This is a major event that the market is keeping an eye on. Interest-rate sensitive equities in many industries, such as banks, automobiles, housing finance, real estate, metals, and so on, would be the first to react to rate choices.

How does inflation affect the market?

Inflation is defined as a steady rise in the price of goods and services.  Money’s purchasing value is eroded when inflation rises.  If the price of 1 KG of onion has grown from Rs.15 to Rs.20, all other factors being equal, the increase can be attributed to inflation. 
Inflation is unavoidable, but a high rate of inflation is undesirable since it can cause economic uncertainty.  Inflationary pressures tend to give a negative signal to markets. 
Governments seek to bring inflation down to a tolerable level. 
Inflation is usually calculated as an index. 
If the index rises by a specific percentage point, it implies growing inflation; conversely, if the index falls, it suggests cooling inflation. 

Inflation indices are divided into two categories. 

  1. Consumer Price Index (CPI)
  2.  Wholesale Price Index (WPI) (CPI). 

What is the Wholesale Price Index (WPI)?

The Wholesale Price Index (WPI) measures price changes at the wholesale level. 
When goods are traded between organisations rather than to actual customers, it captures price changes. 
Inflation is calculated using the WPI, which is a simple and convenient method. 
However, this inflation is measured at the institutional level and does not necessarily reflect inflation experienced by consumers. 
As I write this, the May 2014 WPI inflation rate is 6.01 percent. 

What is CPI ( Consumer Price Index ) ? 

The CPI, on the other hand, measures the impact of price changes in the retail sector. 
What matters to you as a consumer is CPI inflation. 
The CPI is calculated in great detail since it entails categorising consumption into many categories and subcategories in both urban and rural areas. 
An index is created for each of these categories. 
This means that the final CPI index is made up of a number of internal indices. 
CPI is calculated in a very precise and accurate manner.
It is one of the most important indicators for analysing the economy. 
Every month, the CPI numbers are released by the Ministry of Statistics and Programme Implementation (MOSPI), a national statistical body. 

What is Industrial Production Index (IIP)  ?

The Index of Industrial Production (IIP) is a short-term indication of the state of the  country’s manufacturing sector.
The Ministry of Statistics and Programme Implementation releases the data (together with inflation data) every month (MOSPI).
An increase in the reverse repo rate is bad for the economy since it reduces the amount of money available.
At the moment, the reverse repo rate is at 7%.

What is the cash reserve ratio (CRR)?

Every bank is obligated by law to keep funds with the RBI.
The amount they keep is determined by the CRR.
If the CRR rises, more money is taken out of the system, which is bad for the economy.
Every two months, the RBI meets to discuss interest rates.
This is a major event that the market is keeping an eye on.
Interest-rate sensitive equities in many industries, such as banks, automobiles, housing finance, real estate, metals, and so on,
A lower IIP statistic puts pressure on the Reserve Bank of India (RBI) to cut interest rates. 
The graph below depicts the percentage change in IIP over the last year. 

What is Index of Purchasing Managers (PMI)  ?

The purchasing managers’ index (PMI) is a business indicator that attempts to measure activity across the manufacturing and service sectors of the economy.  This is a survey-based indicator in which respondents – typically buying managers – report how their business perceptions have changed over the previous month. 
The service and manufacturing industries each have their own survey. 
The survey’s results are compiled into a single index. 
New orders, output, business expectations, and employment are some of the topics covered in the survey. 
The PMI fluctuates around 50 in most cases. A number of more than 50 implies that the economy is expanding, while a reading of less than 50 suggests that the economy is contracting. 
And a reading of 50 suggests that the economy has remained unchanged.
A budget is an event in which the Ministry of Finance analyses the financial situation of the country in depth. 
The Finance Minister presents the budget to the entire country on behalf of the ministry. 
Major policy pronouncements and economic reforms are made during the budget, which have an impact on numerous industries across the market.
Because ITC is an index heavyweight, if market players start selling it, the markets will fall. 
For this reason, ITC traded 3.5 percent lower as a reaction to the budget release. 
A budget is a once-a-year event that takes place in the last week of February. 
The budget announcement may be postponed under some specific circumstances, such as the installation of a new administration. 

What is ” Announcement of Corporate Earnings ” of a Company?

This is possibly one of the most significant occurrences to which the stock market reacts. 
Listed firms (those that trade on the stock exchange) are required to declare their profits numbers once a quarter, generally known as quarterly earnings numbers. 
During an earnings announcement, the company provides information on a variety of operational activities, such as:
  1. How much revenue did the company generate?
  2. What is Budget for company and its expansion?
  3. How has the company managed its expense?
  4. How much money they did the company pay in terms of taxes and interest charges?
  5. What is the profitability during the quarter?

Besides some companies give an overview of what they expect from the upcoming quarters. This forecast is called corporate guidance.

 

What kind of disasters events affect the Stock Market ?

Corona / Covid 19 hit the various country’s causing the stock market crash around March 2020. This is kind of calamity which affect the market drastically.

 

Conclusion:

Here we have covered  what type of upcoming events that can impact the stock market , impact of rbi monetary policy on stock market, impact of reverse repo rate on stock market, major world events affecting financial markets 2021, major events that affected the stock market and also events that affected the stock market 2021
 

 

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