How Global events affect the stock market?

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The exchange of net asset shares of public firms takes place through stock markets, which are marketplaces for buyers and sellers. A sophisticated economic system, the stock market is impacted by global events. Share prices and the performance of the stock market trading generally can be influenced by a country’s economic expansion or contraction, international relations, political shifts, and other external variables.

Numerous crises that have plagued the international economy since the turn of the millennium have inevitably impacted the Indian economy. Dot-com crash, World Trade Centre terrorist attack, US subprime crisis, European debt crisis, stimulus packages, trade tariffs, US presidential election, COVID 19 epidemic, etc. are a few examples of significant worldwide occurrences. The US and other worldwide financial markets are significantly impacted by this crisis, which eventually affects the Indian stock market.

Events Around the world that impacted the Indian stock market

Collapse of the US housing bubble

One of the most important events that has a considerable impact on the Indian stock market is this one. The global financial crisis began in 2008 as a result of this disaster. Throughout history, a number of things have had an influence on the stock markets, but none may have had as much of an impact as the 2008 US housing bubble bust. NIFTY decreased by 10.06% in September 2008.

US Federal Reserve Policies

The Indian stock market may be impacted by US Federal Reserve policies. For instance, when the Fed reduces interest rates, the stock market may benefit since corporations will find it more affordable to borrow money and make investments. The stock market, on the other hand, may see a decrease when the Fed raises interest rates since higher rates make borrowing more expensive.

Terrorists attacked the World Trade Centre

The impact of the terrorist assault on America on September 11, 2001 was felt by the whole world’s business sector. Almost every sector of the economy suffered financial harm as a result of the stock markets’ abrupt collapse. The terrorist assault on the World Trade Centre struck just as the Indian stock market was beginning to recover from the dot com crash of 2000. Miraculously, though, the markets and the economy as a whole quickly recovered.

Subprime Crisis

The huge rise in high-risk mortgages that led to the subprime catastrophe was a major factor in the most severe recession in decades. Due to the mid-2000s housing bubble and cheap interest rates, several lenders decided to give house loans to customers with bad credit. Many borrowers were unable to repay their subprime mortgages after the real estate bubble broke. The Great Recession, the financial crisis, and a significant decline in equity prices were all caused by the subprime implosion.

Transition in Politics

Donald Trump was one of the candidates for the 2016 US presidential election. The majority of voters disliked his style of campaigning and were concerned that the US and the global economy would suffer if he were elected president. Trump was elected US president, assuaging the public’s fears. This caused the US market to decline abroad, especially in India. However, this crisis was short-lived, and the markets soon bounced again.

US-China Trade War

The US-China trade war has had a variety of effects on the Indian stock market. The stock market has fallen as a result of a drop in investor confidence brought on by the trade war’s uncertainties. The global economy has also slowed as a result of the trade war, which has an impact on India’s export-oriented industries like IT and pharmaceuticals. During that time depending on the policies of the specific stock exchange or brokerage you are using, a different minimum amount for trading is needed to trade stocks.

COVID 19

Early in December 2019, COVID-19 was created in Wuhan, China. The sickness had become pandemic by March 2020 after becoming global. Lockdowns brought on by COVID-19 had an impact on global supply networks and output. The Nifty 50 plunged by 12.98% or 1,135.20 points on March 23, 2020, to a 4-year low of 7,610.25 points in the greatest fall to date. One of the most significant occasions in the history of the Indian stock market is regarded as the fall on March 23, 2020.

High Inflation And the Subsequent Increases in Interest Rates

Global economies are struggling with severe inflation in 2022. In India, inflation has so far in 2022 continued to be higher above the RBI’s target range of 2% to 6%. In the US, inflation in June 2022 was 9.1%, which was a 41-year high. People’s purchasing power is reduced by high inflation, which reduces consumption. Several central banks have announced increases in interest rates to combat inflation. 

However, raising interest rates also makes borrowing more expensive, reduces consumption, and slows GDP in addition to cutting inflation. This is why investors pay close attention to inflation and interest rates. 

Conclusion

The stock market may be significantly impacted by world events. Weather catastrophes, trade conflicts, political unrest, and natural disasters can all have an influence on the stock market’s performance. When making investing decisions, investors should be aware of major worldwide events and how they could affect the stock market. Investors may handle these developments and reduce their risk by diversifying their portfolios and keeping up with current events on a global scale. Additionally, with the demat apps from kotak securities can also help in trading globally. 

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