What is the effect of US Stock market on Indian stock market

  

Reaction of Indian Stock market & US stock market on Positive & Negative news or Data

A question comes to everyone's mind that when there is a fall in the US stock market, why does the India stock market also fall? There are many reasons that world stock markets are connected with each other. Let us discuss few reasons.

Globalisation:

India went for privatization when Indian govt announced budget of 1991 & this is called new economic policy.  Due to globalization, one concept came into this world that is any business entity independent to spread of products, technology & services of business to any other country as per policy norms of that country. If Indian companies set up their business in USA then they have to follow the business policies of US market. Also, Indian companies have to identify the taste or the requirement of the US people for selling their products. It requires lot of research and big investment too. If companies will not meet the requirement & standard of quality measurements of the country then it will be very difficult for the company to sell their products into that country & it will lead to the loss in the business. Most of the big Indian companies having businesses are running in the US market and those Indian companies are also listed on Nifty or Sensex, therefore if anything went wrong with their businesses in the US market then it will impact on the company’s stock prices. Most of the big Indian listed companies have hold on nifty/Sensex. If Indian listed companies will do well in the overseas then profit of those companies will increase & it will reflect into the companies stock prices.

             

Political relationship of the both countries:

The political influence play vital role in the growth of two countries. If both countries have good deals then it will give big boost to the business of both countries. There are many US companies those are listed in the Indian Stock exchange if there will be best business opportunities to grow then it will attract others companies to start their businesses into India. It will only happen when both countries will have good political bonding.

Economic Policies impact:

The businesses of both the countries are highly dependent on the monetary policy, fiscal policy, tariffs of trade. If trade tariffs will be increased in the US then it will adversely effect on the profit of the Indian companies because companies have to pay more for exporting their products to US market. It will drag down the Indian stock market.

Rate of Currency:

US dollar is accepted almost everywhere in the world but Indian currency is weaker than other leading countries currencies in the world. If the Indian rupee will depreciate then it will have bad impact the Indian companies.

For Example:  If Indian companies are buying any raw material from the US market then companies have to pay more for buying their products & it will have directly impact on their profits. Similarly as discussed above if trade tariffs will increase by US govt then it will also impact on the Indian companies’ profit. It will lead to downfalls in the Indian stock market for couple of days or we can say for few weeks.

Visa Policy:

We all know that there are many Indian Software companies those have strong presence in the USA and many Indian software engineers are working with USA companies or Indian software companies. If USA Govt will make strict visa policy for staff hiring from overseas then it will have bad impact on the Software companies. It will drag Indian stock market down. Especially, it will have bad Impact on the Software or IT sectors listed companies. It will also take Indian market down for short term.

 For example:  Recently some strict announcements made by US govt or US visa policy makers on H1B1 visa or other business visas case.

Announcements on Events:

There will be more Impact on Indian stock market before or after the announcement of fiscal policy, Inflation data, employment data, GDP data, result of Elections if awaited, all these events are also on the radar of the Indian big traders as well as with Foreign Institution Investors and domestic institution investors. If anything positive comes into these data then it will take US market on higher side and Indian market will also follow the trend. If the data is negative then it will take both markets down.

Rate o Interest:

If there is meeting of central bank on increase or decrease of the interest rates then it will impact more on Indian and US markets. Increase in rates will have negative impact on the businesses for short term and we will see profit booking in the US market and Indian market too. For example: The companies those have taken more loans from the banks for running their projects they have to pay more interest on their loans, Some of the Sectors like real estate, infrastructure and manufacturing unites etc.

Unexpected Pandemic:

In the end of 2019, when covid 19 had given knock to the countries then we have seen huge panic selling’s in the world markets including US, Indian China, Japan & many other countries. This pandemic left bad impact on the US businesses as well on Indian businesses because of lock down situations which was very  required in that stage of pandemic . Many business houses came into the losses. Such kind of unexpected pandemics drag down the Stocks exchanges.

Announcement of stimulus packages:

Sometime, when the businesses of the countries are coming into the loss then governments of those countries announce some stimulus packages for giving support to their industries. Those stimulus packages can be into many forms like relaxation in taxes, relation in some policies etc. For an example, recently we have seen announcements of $ 1.9 trillion stimulus package by the recently elected US president Joe Biden & Indian Govt Announced 20 lakhs crore covid stimulus package. These both announcements took US market and Indian stock market on higher levels and both countries stock markets made new life time highs.

In nutshell, we can say that US stock market and Indian stock market are interconnected due to many factors as discussed above but sometime if any country have their own reasons like political problem, internal economic growth issues etc then that country may react negatively for short term. Always keep yourself alert in the stock market and have strong grip on the International news because Markets can react on either way positive or negative.

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