The Role of Geopolitical Tension, Crude Oil, Gold, and Dollar Index in Indian Market Volatility
If you’ve been following the Indian stock market lately, there have been significant fluctuations in the market, moving up and down every week. There are a lot of factors behind this market uncertainty, such as global politics and currency shifts, etc. Additionally, oil prices, war situations, and gold rates are also behind the Indian market volatility.
Such trends have made the foreign investors more concerned, as they have pulled out around ₹1.38 lakh crore from Indian stocks lately. At the same time, with increasing global uncertainty, domestic institutional investors (DIIs) have achieved a record holding of around 18% in Indian stocks.
What Is Indian Market Volatility?
Market volatility means the fast fluctuations in stock prices. For some of us, volatility can be a serious concern with everyday changes in our stock portfolio.
Volatility of the stock market is also beneficial for those who are looking for good stocks at significantly lower prices. One needs to understand, analyse, be smart, and be sure about the decision in a volatile stock market.
Geopolitical Tensions and Their Impact
Gone are the days when global politics was limited to abroad. It has a huge impact on the Indian stock market, driving uncertainty among investors.
Usually, the politics or global events in the US, the Middle East, and Europe impact the oil and currency prices, causing volatility in the Indian stock market.
Crude Oil Prices and the Indian Economy
Since India is one of the biggest oil importers, the rise in oil prices impacts both the transportation and manufacturing sectors. The rise in oil prices leads to inflation that impacts everyone in terms of savings or profits.
The increase in crude oil prices can bring the stock market down. Although it’s a good thing for investors, they pull out the money because of rising inflation in the future.
Gold Prices and Investor Sentiment
As every old person mentions, gold is the safest investment. In the case of Indian market volatility, the investors tend to move from stocks into gold. This is why the gold prices thrive even when the stock market is struggling.
With cultural, wedding, and emotional sentiment, Indians themselves maintain the huge demand. With the stock market struggling, investors would definitely prefer to make a safe investment.
Dollar Index and Foreign Investment
The Dollar Index can be a unit to measure the dominance of the US dollar against other nations’ currencies. With the dollar thriving at high numbers, global investors prefer investing in the US over India.
This weakens both the Indian rupee and stock market, impacting the price control and profit margins. So, once the dollar starts getting weaker, the same investors prefer to put more money in the Indian market.
The Role of FIIs and DIIs
Foreign Institutional Investors (FIIs) and Domestic Institutional Investors (DIIs) are two pillars behind the up-and-down movement of the market. FIIs are the ones that pull out their money in case the dollar rises high.
DIIs make diverse investments with money in mutual funds, insurance companies, and pension schemes. When FIIs tend to sell stocks, DIIs fill the balance with the purchase.
Risk Management and Investor Takeaways
Out of the several ways to handle the Indian market volatility, it is important to stay aware of the overall market price high and low scenarios. Always be proactive when it comes to global price rises in oil, gold, and the dollar index to understand how the market works.
Making hasty or wrong decisions because of the market panic is another bad step. Focus on the long-term benefits and keep a tap on the market future with FII and DII tracking.
Conclusion
Hence, India alone is not behind the volatility in the stock market or trade. You need to keep an eye on the geographical news, headlines, oil prices, and currency changes. The best way to handle the Indian market volatility or fluctuations is to maintain calmness, be open to diverse investments, and always put your money to work for long-term benefits.
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This analysis is for informational purposes only. Please consult a SEBI-registered financial advisor before investing.
– Chandan Pathak
Equity Research Analyst, StockYaari