Two major developments have come to light at the global level, which may impact the Indian stock market as well. First, the announcement by Iran to end its nuclear program and second, the final outline of the trade deal between India and America. Market experts believe that both these incidents can reduce global uncertainty and the return of foreign investors i.e. FIIs to the Indian market is possible. Its effect was seen today in both Sensex and Nifty indices where there was a tremendous rise in the market in the afternoon.
Iran’s decision will reduce geopolitical tension
There was tension in the Middle East for a long time regarding Iran’s nuclear program. Due to this, there was instability in the oil market and the global financial market. Now if Iran actually moves towards dismantling its nuclear program, it could reduce tensions in the region.
The stock market directly benefits from reduced geopolitical risks. Investors invest with more confidence in such an environment and the ability to take risk also increases. This can increase investment in emerging markets, especially countries with fast growing economies like India.
India-America trade deal will increase confidence
The second important factor is the proposed trade deal between India and America. If the final line of trade agreement is finalized between the two countries, it can have a positive impact on many sectors. Especially manufacturing, IT, pharma and export based companies can benefit.
America is India’s largest trading partner. In such a situation, increasing trade cooperation between the two countries will create new opportunities for Indian companies and will also strengthen the confidence of foreign investors.
Market may get support from return of FII
In the recent past, foreign institutional investors (FIIs) had withdrawn some amount of money from the Indian market. Its effect was also visible on the market movements. But if global risks reduce and the economic environment remains stable, then FIIs can again increase investment in the Indian market.
FII purchases increase liquidity in the market, which provides support to major indices like Sensex and Nifty. Along with this, a rise can also be seen in midcap and smallcap shares.
What signals for investors
Experts believe that if both these developments move in a positive direction, then a new bullish environment can be created in the Indian stock market. However, investors will also have to keep an eye on global economic data, oil prices and policies of central banks. Overall, the reduction in global tensions and India’s strong economic condition are giving positive signals for the stock market, due to which the market may see a new rise in the coming times.