By MALILA Harris
MUMBAI NEWS – Indian stock markets had gone through a roller-coaster ride in last week and closed at an all-time high level. The market suddenly got boost up with the announcement from the US Federal Reserve, which provided USD 600 billion in quantitative easing to boost to the US economy. Analysts are contemplating that a chunk of this money will flow into emerging market such Indian as a part of hedge fund and foreign institutional investor (FII) investments. Hence, the emerging market will get a boost and remain strong over the medium term.
On the other hand, they are also worried about the Coal India IPO that will probably still to find the trust of investor in the markets. Not only this, there are many more IPOs are in the list, which can’t improve the sentiment of investor. So, they advise a through analysis before investing. The dollar also weakened after the Fed announcement.
There are some of the factors that can influence market direction in the short to medium terms. These are as follows:
Quantitative Easing
Due to economic turmoil in United States, the Federal Reserve reviewed the condition and announced quantitative easing to boost the economy. The economic growth of the US has declined drastically in one year. At present the US economy crawling at the rate of two percent, and the jobless scenario is also growing at around 10 percent. Analysts believe that quantitative easing will force money to flow into emerging markets such as India. It means liquidity of money, and the inflation will further rise up. However, valuations are already stretched in the markets and investors should exercise caution by investing only their risk capital.
RBI Rate Hike
In its quarterly review meeting, the Reserve Bank of India (RBI) has increased key policy interest rates by 25 basis points. Now the repo rate stands at 6.25 percent so most of the banks have decided not hike interest retail loans. However, analysts believe that borrowers should be prepared for increase in interest rates.
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