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    • 5 Things to know before Diwali Muhurat Trading

      Diwali is here and Samvat 2074 is coming to an end. It would be an understatement to say that the year gone by was a roller coaster. As we all look forward to this year’s Diwali Muhurat Trading, let’s have a flashback. Let’s have a deeper look into how the major economic events have impacted our economy.

      Related read: Worried about volatile markets? Here is your checklist

      Here are five major points, you may want to reflect upon, before Muhurat Trading, this Diwali:

  • Global Trade War

    India, like many other emerging economies, has been facing the contagion effect of the US-China trade war. Emerging markets have taken a beating, with their currency depreciating and exports declining. This has impacted their balance of trade in a negative way. However, the global trade war also presents a trade opportunity for emerging markets like, India, Indonesia, and Brazil. Indian policymakers have been trying to find out strategic trade advantage opportunities.

    Related read: Emerging markets have taken a beating: All you need to know

  • Crude Oil Prices

    Global crude oil prices have experienced a rise of 24%, since April this year. Escalating crude oil prices combined with sharp rupee depreciation has doubled India’s problems. High oil import bill is also one of the reasons for the high current account deficit predictions. High crude oil prices have an adverse effect on the economy and also leads to a rise in inflation. Further, companies like tyre, lubricants, logistics, footwear, refinery, and airlines hugely depend on crude oil prices. Escalating crude oil prices have a negative impact on the stocks of these companies.

    Related read: Fuel prices on fire: The what, why, how and what now

  • Current Account Deficit (CAD)

    A high CAD and sliding forex reserves have strained India’s trade balance. India’s CAD has widened to a four-quarter high in Q1. Presently, it stands at the six years high level. A high CAD indicates that India owes more foreign exchange to other countries primarily due to the high value of imports than exports. The recent high CAD situation is due to higher crude oil prices and the strength of the US dollar against major currencies. Further, high CAD has led to more foreign currency outflows. This has eventually resulted in rupee depreciating even further.

    Related read: What does a high Current Account Deficit mean to Investors?

  • Foreign Flows

    India has improved its position it the World Bank’s Ease of Doing Business global index to 77 from 100 a year earlier. This is reflected in the rise in India’s Foreign Direct Investment (FDI) flows. However, the situation is not similar when Foreign Institutional Investments (FIIs) are considered. Returns of foreign investors are converted into their local currency. Therefore, any change in the value of rupee makes these investors panic. A constant rupee depreciation affects their net earnings in both, stock and bond markets. FIIs have sold Indian shares worth $3.75 billion so far in October. Other factors like a high CAD and the panic among NBFCs after the IL&FS default has resulted in distress sales of funds.

    Related read: 4 questions you may have about rupee depreciation

  • Overall Economic Growth

    Growth forecasts from major institutions like the Reserve Bank of India, the World Bank, and IMF remain around 7% for 2018-19. Yet, investors would be closely tracking the purchase manager indices or PMI, inflation, industrial production, and the trade data every month. Any signs of deterioration in the trend would be negative. Some of those indicators make a sober reading for September 2018. On top of that, the monsoon has also ended poorly and short of the average. This could put pressure on rural consumption in the months ahead.

    Click here to read about India’s Q1 GDP data.

    Related read: MSCI India Index outperforms the MSCI Emerging Market index: Things to know

    • India in dire need of long-term growth strategy Read more

    • How Indian Economy Hit Its Highest Growth Rate in Nearly 2 Years and Cemented Lead Over China  Read more

  • US$ 22 Billion

    India attracted FDI flows worth US$ 22 billion in the first half of 2018. However, during the same period, the global FDI flows fell by 41%, according to a UN report. This was majorly due to the tax reforms carried out by the government of the United States. Thus, even when the global financial picture appears gloomy, Indian economy is found attractive to many foreign investors.

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