Fall of Rupee Value: The rupee falling down fast to 63 levels against the dollar and it can sink to 65 levels(1 dollor= 65 Rs.), as experts forecast. The rupee hit 62.90 in early trade on Monday, its lowest level since November 22. Low value of Rupee means the FII’s (Foreign Institutional Investor, you can also check one of my previous blog http://thekalyan.com/2014/01/10/fii-and-its-role-in-indian-markets/ ) start selling the rupee and start investing the dollors in some other markets. This creates the tension of loosing investments in the SENSEX, causing the markets to loose the shares, thus leading the market value to fall down.
Image courtesy: firstpost.in
Quantitative Easing: The US central bank is currently buying assets worth $85 billion per month from the marketplace which has helped ease global liquidity conditions and India has been a beneficiary with respect to continuous inflows of capital. Fed officials are seen cutting their bond-buying programme by another $10 billion.
As per the latest data, December jobless rate in the US fell to 6.7% from 7% month on month. Also, in the third quarter, the US economy grew at about 4%. All these leads in reduction in buying these assets. Therefore, any reduction in the pace of easing by the Federal Reserve is likely to affect the capital inflow and also the value of the Indian rupee.
Rise in Repo rate: As WPI (wholesale price index is at higher rate than the retail inflation, RBI may see a rise in repo rate (http://thekalyan.com/2013/12/16/rbi-what-is-repo-rate/)
Elections 2014: Last year, the stock market was sort of confident that a BJP-led government would make it to a stable govt. but AAP will have an impact in having the BJP to have a stable govt. Latest surveys see the BJP managing a little over 200 seats, but then that won’t be enough to form a strong and stable government, which is a key factor for good markets. An instable govt., will have a less strength in the decisions because of external support by other parties, making the markets rely on the govt. standpoint.