How Do Global Indices Impact the Indian Stock Market?
New Delhi, India: The Indian stock market is impacted by both macroeconomic and microeconomic factors, with macroeconomic variables influencing the entire economy or sectors and microeconomic factors focused on individual stocks. Following globalisation, the Indian stock market has been more connected into the global share market, with changes in Indian indexes reflecting in worldwide indices. Foreign portfolio investors frequently make choices based on these indexes, causing losses in other markets and influencing foreign capital flow into India. Sectors like IT rely largely on US corporate expenditure and investments, whereas Indian oil firms rely on global Brent Crude prices and their influence.
GIFT Nifty
The transition from SGX Nifty to GIFT Nifty is driven by regulatory considerations, allowing for better oversight and control of Nifty derivatives trading. This aligns with India's broader financial sector development goals, as the designated international finance centre aims to attract global investors and promote financial services development.
GIFT Nifty's Impact on Indian Stock Market
Trades with NSE Nifty, allowing real-time price reactions.
Provides additional access to Indian stocks, potentially increasing trading volume and liquidity.
Serves as a benchmark for the Indian stock market, especially during off-market hours.
Potentially beneficial addition to the overall ecosystem despite its evolving impact.
Indian VIX
The Indian VIX (Volatility Index), also known as the Fear Index, is a measure of market fear in Indian markets. It is calculated using the Black & Scholes Model, where volatility is the input and option value is the output.
Indian VIX's Impact on the Indian Stock Market is as follows:
Indicates market risk perception.
A sharp rise in VIX indicates increased volatility expectations.
Consistently negative correlation with Nifty levels.
Potential bottoming out and long positions indicated by VIX peak.
Understanding the VIX-Nifty relationship aids informed investment decisions.
NASDAQ
NASDAQ, a US stock exchange known for its focus on technology and growth-oriented companies, can significantly impact the Indian market. Its performance can influence global investor sentiment towards technology and growth stocks, affecting investor confidence worldwide. The NASDAQ is home to many technology companies with global presence, including in India, and changes in their valuations can have a ripple effect on technology stocks in India.
NASDAQ's Impact on the Indian Stock Market
Foreign institutional investment indirectly impacts Indian markets.
Cross-border investments may affect Indian companies listed on NASDAQ.
The Indian market is influenced by domestic economic conditions, government policies, corporate earnings, and global trends.
Investors should consider various factors when making investment decisions.
FTSE 100
The Indian stock market is influenced by the FTSE 100 due to interconnected global investment strategies and economic ties. While the Indian equity market has shown aggressive growth, outpacing the UK's in market value, fluctuations in the FTSE 100 can impact investor sentiment and capital flows into India.
FTSE 100's Impact on Indian Stock Market
Brexit uncertainty dampens UK's market performance.
Investors seek growth in India.
Decline in FTSE 100 may redirect investment.
Strong FTSE 100 boosts global risk appetite.
Benefits Indian equities indirectly through increased investor confidence.
Brent Crude Oil
Stock markets are highly sensitive to factors like policy announcements, interest rates, exchange rates, and economic stability. Global oil prices are a major factor, with the UK experiencing a bear run due to the Oil Crisis between 1973 and 1974.
Brent Crude Oil's Impact on Indian Stock Market
Recent events like the virus outbreak's negative derivatives contracts indicate oil prices don't significantly impact stock markets.
Some studies suggest oil prices don't affect the entire stock market.
Increased oil prices reduce profit margins and stock prices.
Fall in oil prices boosts investor confidence and positively affects stock prices.
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