Factors Affecting Indian Stock Market | Trader’s Must Know

The stock market volatile nature makes it an appealing possibility to enter. The stock market’s future performance is hard to anticipate. This keeps the investor awake, debating whether or not to invest.

There is no simple formula that can predict how a stock’s price will move. However, there are a few factors that cause a stock to rise or fall in value.

Government Policies 

  • The Union Budget is a significant event since it affects stock prices, market sentiment, and much more.
  • Stocks will soar if the markets react positively to the budget. However, if the markets perceive Budget 2022 to be unfavourable to them, stock prices will change negatively.
  • There’s a chance that any modification or adoption of new policies by the government will have an impact on the stock market.
  • If government increases Tax slabs the market will fall and vice versa.
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RBI Monetary Policy 

  • The Reserve Bank of India is constantly evaluating its monitoring policies. The stock prices are affected by changes in Repo and Reverse Repo rates.
  • When the Reserve Bank of India raises the key interest rates, it affects liquidity position. As a result, borrowing becomes more expensive for them, and loan rates rise as a result.
  •  As a result, borrowing becomes too expensive for businesses, and they may struggle to meet their debt obligations.
  • Investors see it as a roadblock to the company’s expansion and begin selling shares, lowering the stock price.

Exchange Rates 

  • When the rupee weakens against other currencies, Indian goods become more expensive in foreign markets. 
  • Companies with international operations are particularly affected. Companies that rely on exports see a reduction in demand for their products in other countries. 
  • As a result, export revenue falls and the stock values of such enterprises fall in their home nation.

Inflation Rate 

  • Inflation is defined as a rise in the price of goods and services over time. 
  • Inflationary pressures deter investment and slow long-term growth in the economy. 
  • Stock market listed companies may delay investments and operations, leads to adverse economic growth.
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Interest Rates 

  • When interest rates rise, banks raise lending rates, raising the cost of borrowing for both businesses and individuals. 
  • The increased costs will have an influence on the company’s profit margins, which will have an impact on the stock price.

Institutional Investors 

  • The actions of FIIs and DIIs have a significant impact on the stock market. 
  • Because they invest in large amount, their entry or exit will have a significant impact on the equity market and affect stock prices.


  • Elections, budgets, government intervention, stability, and other events all have a major impact on the economic system. 
  • Political events and budget releases cause a great deal of market volatility, which has a significant impact on the stock market.

Natural Disaster/Pandemic

  • Natural disasters have an equal impact on people’s lives and the economy. 
  • It has an impact on the company’s performance as well as people’s ability to spend money. 
  • This will result in decreased levels of spending, sales, and revenues, all of which will negatively impact the company’s market performance.
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Economic Growth

  • Economic growth lends to profitability of firms, it indicates increase in the production of goods and services. 
  • Economic growth rate impacts the stock market, If growth is constant and positive prices increases and vice versa. 
  • GDP and oil prices also have huge impact on stock market.

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