There are close relations between global factors and India shares because they produce an impact causing movements in the Indian stock markets to fuel growth or declines. It is for these reasons that awareness of these effects is of necessity required among investors, policy makers and market specialists. This paper aims at explaining how global factors influence the Indian stock markets with instances and the working of the case looked at.
1. Geopolitical Tensions
Conflict, wars and diplomacy issues at a national or regional level have a capacity to cause uncertainty in the international markets. For example, the current trade war between the United States of America and China have manifested their impacts on the India’s stock market in various ways. This is an instance because uncertainty usually arises with trade policies, tariffs, and sanctions affecting investor confidence. Using the data currently available in histories and databases, it could be estimated that during the periods of tensions in geopolitical relations, Indian stock market witnesses higher fluctuations of the Nifty 50 and Sensex indicators, which reflects the mood of the investors.
2. Global Economic Policies
Due to the dynamics of the international financial system, the major players’ policies including the US greatly influence the world markets. Global developments such as decisions on interest rates by the federal reserve influences capitals flows into emerging markets such as India. The other relation which is negative constitution when the Fed increases its interest rate the foreign investors withdraw funds from the Indian market to invest in the US resulting to decline in the Indian stock markets. On the other hand, whenever there is cut on the interest rate in the US, there is fund flow into Indian equities that, in turn, propels the price up.
3. Commodity Prices
These are global interdependencies since certain commodities such as oil directly affect India’s economy and consequently its market. Crude oil is a sensitive commodity in this regard whereby the price changes can cause variations in Inflation, trade balances, and corporate profits especially for countries like India that import most of their crude oil. Dominance of the oil prices which tend to rise results in high costs for industries especially the transport and manufacturing industries hence reduced profit margins and a reduction in share values. On the other hand, reduction in the prices of oil has a positive impact on the market mood resulting in higher stock prices.
4. Pandemics and Health Crises
The COVID-19 pandemic is perhaps the best illustration of how social crises influencing people’s health worldwide also affect stock exchanges. At the end of 2019 and beginning of 2020, due to emergence of COVID 19, the stock market all around the world including the Indian stock market declined sharply because of the fear of economic slowdown and instability. Reach for revenue evidences, shutdowns, slump in consumer expenditure and disconnection of chains weighed on corporations’ profits and, in result, battered stock values. The indices in the Indian market decreased significantly throughout the year and were able to pick up as vaccination commenced along with the stimulus packages.
5. Global Trade Dynamics
Trade liberalization involving compositional changes either in formation or dissolution of trade blocks affects the Indian stock market. This option involves the disruptions of supply chain in the US and China as part of the trade war which affected some Indian firms that import and export their products. Likewise Brexit amounted to disruption in inter-national markets and India emerging as a victim of investor’s apprehensions about its impact on global trade and investment.
6. Technological Advancements and Innovations
Another factor that affects the stock market is technological promotion and global trends in innovative solutions. New investment area emerged with the advanced technologies of digital media, energy from the renewable sources and biotechnology. Some examples are that Indian tech stocks, for instance, generally respond to the US counterparts since any alliances, investments, and activity in the Silicon Valley will have an impact on Indian firms.
7. Global Financial Crises
It can be pointed out that the effects of financial crises, for example, the contemporary global financial crisis of 2008 on world stock markets. The events leading down the shutdown of the Lehman Brothers Company in 2008 led to a sell-off of many different markets, including the Indian market. The case of Indy also drew foreign investors to pull out their funds resulting to an effect on the Indian stock market with more than a year to recover fully. Such crises create lose of investor confidence, cautious, cut on liquidity, and a decline in the rate of business activities that in turn affect corporate earnings and stock prices.
Conclusion
Among the widely acknowledged facts, one of the most important is the fact that the destiny of the Indian stock market is influenced by the events taking place globally. Actually, investors and policymakers have to be aware of global processes and their possibly occurred consequences. The purpose of global analysis is to establish correlations and valuable associations between the world’s events and market fluctuations so as to minimize potential threats and maximize possibilities. The complex and ever-evolving nature of global and local influences that impact a country’s economy and markets should be evidence of at least some level of caution while investing and analyzing a market in the modern era.
