Fundamental Analysis

Trading the Economic Crisis in India

Strategies for Trading Profitably During Uncertain Times

Good news! You can still make money trading despite the current financial crisis. Although the world is rife with bad news, markets are still functioning and now is the time to take full advantage of market volatility.


Why is there an economic crisis in India?

If you’ve been watching news and following the economic turmoil, you may be feeling a bit down on your future financial prospects. Much like the rest of the world, India is facing tough economic times resulting from worldwide shutdowns and quarantines due to the Covid-19 pandemic.

While all this is troubling news, it is important that you consider the opportunities that are being presented to those that are willing to challenge the current trends and come out on top once the world recovers from this setback and even before that recovery occurs.

Let us provide you with the basic facts surrounding the decline of the Indian economy and then show you can emerge from the crisis not only financially intact but well ahead on reaching your investment goals and dreams.


How the Economic Crisis Happened and How India Has Responded

The Perfect Storm

The current economic crisis didn’t come about simply because of the coronavirus, but rather a combination of the virus and the global response to the virus.

One situation has led to another and combined with choices made by world leaders has created other problems.

This has meant that policy makers are constantly trying to counter the effects of their last decision. The beginning was created with tourism and travel bans. While these measures looked to be helpful in isolating countries from the virus, they also killed major industries that rely on tourism. India benefits significantly from this sector.

Of course, the travel bans didn’t stop the spread of the virus and so shutdowns and quarantines followed. Once again, the economic impact of shutting down whole sectors of industry and production, has had a devastating effect on the global economy and not just India.

This has led in huge reductions of demand for goods and services especially from U.S. consumers, which form the foundation for global consumerism. When the U.S. stopped buying as many goods, it affected nearly every country in the world in some way or another.

With less demand, there is far less money in circulation from one country to the next and within the country. Therefore, we see less transactions and less need for workers to service those transactions.

Here are some good examples: Why pay workers to build an office building if there are no businesses that can rent space in that building at the current time? Why produce more clothing when people aren’t buying as much?

Other issues occur even with the production of goods that are still in demand. By locking down areas out of fear of the virus, there has been a reduction in food production since workers weren’t allowed to work or refuse out of fear.

However, there has been no less demand for food since the mortality rate of people contracting the virus is minimal. Same amount of people and less food being produced means higher costs.


Government Response May Hurt More Than Help

India, like many other countries has responded to the crisis with measures that attempt to keep money (and therefore demand) circulating throughout the country to stimulate the economy.

These measures include changing bank regulations to allow for more money to be loaned, lowering the central bank interest rates to allow banks more flexibility in lending, and direct payment of funds to the public.

In India, Modi’s government has mimicked other major nations by creating freezes on loan repayments from the Reserve Bank of India, delaying new regulations on business that were set to begin, and even an ambitious stimulus package of $266 billion USD.

The main problem with these measures is three-fold.

First, printing more money for the stimulus lowers the actual value of the currency since there is more in circulation and causes inflation. While this might be okay for the U.S., which has the largest economy in the world and the default currency, it can create problems for other countries as their currency now buys less.

Second, the value of savings in banks decreases because the interest rates paid to depositors is much less because the central bank lowered rates. So, your money in the bank is losing value faster than it is earning interest. Also, banks are at increased risk of default because borrowers have less ability to pay back loans.

Third, people have stopped spending as much money for fear that further economic hardships will require them to have more money stored up to help them through tough times ahead. This exacerbates the problem because they are spending less, which adds to the economic problems.

For example: a report released in 2020 showed that American savings has hit an all time high of 33% of their income. Remember what we discussed earlier about U.S. consumers driving the world economy. If they don’t spend…


The Silver Lining – How to Emerge From the Crisis Better Than You Entered It

Luckily for you, you are reading this and will be able to learn how to make the most out of a bad situation in order to realize your financial goals. There is good news in all of this for those people that are prepared to capitalize on the situation.

In decades past, average people didn’t have the means or access to trade in the markets without huge amounts of money. Of course, when times were tough, they had even less money making them even more unlikely to participate in the markets in an economic downturn.

The single best way for small investors to profit during this crisis is through trading. The markets haven’t stopped operating and due to the pandemic and all the issues we described above, these markets are even more volatile than normal. This is a good thing.

There are plenty of financial instruments that provide a golden opportunity for investors right now. The global economy is not going to collapse and will eventually “right the ship”. It may not be this year or the next, but it will happen.

People who put themselves in a position to invest while markets are down will be seeing huge windfalls in profits when the situation changes. Those that don’t take advantage now will lose money due to inflation and other fallout from the crisis.

The key is to act now with mechanisms that fit your investment level. Fortunately, you can trade stocks, Forex, commodities online with only a small amount of money. Brokers like Olymp Trade that operate in India allow trades for as little as $1.

The currency exchanges alone are rising and falling daily with every piece of new information that comes out about the U.S., British, or Chinese economies. This type of volatility allows investors to profit off the movement up or down. Currency pairs like EUR/USD (Euro vs U.S. dollar) are providing enormous profits to traders every day.

By trading in Contracts for Difference (CFDs), investors can profit off price movements in either direction the market turns. Not all brokers offer this type of trading, which is why we recommend Olymp Trade, which allows you to profit off of market losses as well as gains.

Even better is the wide range of investment options available to small investors currently. No longer are the “small fish” forbidden to swim in the ocean and trade blue chip stocks, commodities like gold, silver, and oil, and even exchange traded funds like the Dow Jones, S&P 500 and Nikkei.

Big companies recognize this environment and the current market situation, which is why premium firms like Apple and Tesla have announced “stock splits” recently.

Their motivation is simple: to reduce the price of their stock by issuing multiple shares to existing stockholders. This put their expensive stock in the price range for the average investor.


The Bottom Line

If you continue to do what you’ve always done, you’ll continue to get what you always got and maybe even less in the current economic climate.

Here is why. If you hold on to your cash and save because you’re worried about the current crisis, you will have the same amount of money when the crisis ends. However, because the government has continued to print even more money and because prices have increased, you are actually left with less money than you started with.

The key here is to invest your money in a way that outpaces the inflation/devaluation of your cash. Get started trading and you will quickly find that maintaining a steady 5-10% monthly return on your investment isn’t just possible, it is commonplace.

This target will have you outpacing inflation 100 fold or more and put you in a position to reach your financial goals.

Related posts
Technical Analysis

The “Moving Average” indicator

Moving Average (MA) is a trend indicator in technical analysis, that many strategies are based on. It is a line on the chart, which shows the average value of an asset over a...