How Will the Rising Inflation in India Affect the Stock Market? 18.04.2022
Read this week’s digest to learn about the trending economic news and its impact on the Indian market’s price trends.
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Stock Market in India
Is Inflation Making the Indian Stock Market Drop?
The Year-on-Year Consumer Price Index is at 6.95%. Consumer Price Index, or CPI, of 6.95% indicates that the current inflation is near the highest pandemic levels. On the one hand, that may press on the stock market. On the other hand, high inflation, as indicated on the chart below, can push the RBI to tighten the monetary policy.
To hold inflation growth, RBI may hike the Interest rate which is currently at 4%. Such a step may create further downfall in the Nifty 50.
The below Daily time frame shows that the Nifty 50’s downtrend is headed towards the nearest support level of 17,400-17,475. If the index breaks that support, it may get down to the secondary support range of 16,850-17,000 and below in case of a stronger correction. Currently, we believe the market will be mostly pessimistic and stay range-bound in the downward direction.
Impact on the Indian Banking Industry
The Indian banking industry may be under pressure. RBI’s rate hikes may push the country's commercial banks to similarly increase their interest rates on loans. The dynamics of the Bank Nifty may be indicative of the changes.
Risk warning: The content of the article does not constitute investment advice and you are solely responsible for your trading activity and/or trading results.
The Consumer Price Index measures the average change in prices over time that consumers pay for a basket of goods and services.
Higher interest rates increase the cost of borrowing, making both credit facilities and investment generally more expensive.
Nifty 50 in a market index that reflects the collective performance of the 50 large-cap stocks traded in the National Stock Exchange of India.
Support level is a price level or range that is believed to hold a downtrend due to a concentration of demand expected at those levels.
Trading in a range occurs when the price keeps fluctuating within the same price channel for an extended period.
Bank Nifty represents the 12 most liquid and large-capitalization banking sector stocks traded on the National Stock Exchange, or NSE.