COVID-19, the Russia-Ukraine conflict, and interest rate hikes were some significant events for stock markets. This article summarises some recent major events in the Indian stock market. We will be talking about events of domestic and foreign origin that have affected the Indian stock market and the events currently affecting the stock markets.
Domestic Events That Affected The Stock Market In The Past
Demonetisation
In 2016, the government announced the ‘demonetisation’, a move involving the ban of currency notes of ₹500 and ₹1,000 denominations. The result was that 86% of India’s currency was rendered unusable overnight.
The sudden ban lowered the purchasing power of people, and thus, the Indian stock markets suffered. By 22nd November 2016, 2 weeks after demonetisation, NIFTY 50 had fallen 6.34%.
Corporate Tax Cut Of 2019
On 20th September 2019, the Indian government announced massive cuts in corporate tax rates, lowering the base corporate tax rate to 22% from 30% and 15% from 25% for new manufacturing companies.
Prime Minister Narendra Modi expected the tax rate cut to attract private investments from across the globe, improve the competitiveness of the private sector, and create more jobs.
On the day the tax cuts were announced, the Nifty 50 rose by 5.32%.
Also Read: Currency War – Reasons and Repercussions
Global Events That Affected The Indian Stock Market In The Past
US Housing Bubble Burst
The US housing bubble burst of 2008 is one of the most significant events of this century that led to a period of low growth we now know as the Global Financial Crisis. At the root of this bubble was a rise in mortgages to subprime borrowers, i.e. high-risk borrowers with poor credit ratings and inadequate savings, that began in 1999.
When the housing market bubble burst in 2008, global financial markets felt ripples. Historically various events have affected the stock markets, but none might be as impactful as the US housing bubble burst of 2008.
In September 2008, NIFTY fell by 10.06%.
European Debt Crisis
When the housing bubble burst in 2008, it plunged economies worldwide into a recession. As a result, some European countries could not generate enough economic growth to pay back bondholders.
The European debt crisis began with the fall of Iceland’s banking system in 2008. Portugal, Italy, Ireland, Greece, and Spain followed suit in 2009. The result was a lack of confidence in European businesses.
In the Economic Survey of 2011-12, the Indian government noted that volatility in Indian and other financial markets would persist as long as the European crisis persisted.
By 7th May 2010, a few days after it was announced that Greece will receive a €110 billion bailout, NIFTY 50 had fallen 4.93% in just 5 days.
COVID-19
COVID-19 originated in Wuhan, China, in early December 2019. By March 2020, the disease had spread worldwide and reached pandemic status. The lockdowns resulting from COVID-19 affected production and supply chains worldwide.
On 23rd March 2020, in the biggest crash yet, the Nifty 50 fell by 12.98% or 1,135.20 points to a 4-year low of 7,610.25 points. The crash of 23rd March 2020 is considered to be one of the major events in Indian stock market history.
Events Currently Affecting The Indian Stock Market
Russia-Ukraine Conflict
The latest nasty surprise for the Indian stock market would be the Russia-Ukraine conflict that started on 24th February. Russia is one of the biggest exporters of oil and petroleum products. Western nations imposed sanctions on Russia, which increased crude oil prices.
Furthermore, Russia supplies 40% of the world’s palladium while Ukraine produces 70% of the world’s neon, 2 key elements in producing semiconductors (chips). Thus, the shortage of semiconductors was worsened by this conflict.
Semiconductors are an essential component of electronic devices, which power almost everything from communication and healthcare.
Fears of escalation to a nuclear war have also spooked the global markets.
High Inflation And The Interest Rate Hikes That Followed
In 2022, economies worldwide have been dealing with high inflation. In India, inflation has stayed above RBI’s target range of 2% to 6% in all months of 2022 so far. In the US, inflation reached a 41-year high in June 2022 at 9.1%.
High inflation lowers the purchasing power of people and leads to lower consumption. To curb inflation, various central banks have announced interest rate hikes. But, in addition to lowering inflation, hiking interest rates also increases borrowing costs, lowers consumption and leads to lower growth.
This is why inflation and interest rates are being closely followed by investors.
Due to the above-mentioned events currently affecting the Indian stock market, NIFTY 50 fell by 9.07% in the first half of 2022.
Final Thoughts
Over the years, various events have affected the stock markets. Events that affect stock markets may originate in India or in other nations. These events include government moves to pandemics. In some cases, crashes in global markets can also impact the Indian stock market.
Investors might find it challenging to keep up with all these events coming from different locations and asset markets. With economic calendars, you can know when some upcoming events that can affect stock markets will occur, for example, inflation data release. But, some events might occur unannounced.
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FAQs
Factors such as capital flows, inflation, geopolitical conditions, government moves, and industry- and company-specific factors affect the Indian stock markets.
In 2022, the Indian stock market has been adversely affected by capital outflows, the Russia-Ukraine conflict, high inflation and the resulting interest rate hikes.
In 2008, the housing bubble in the US burst and its ripples were felt globally. Various banks all over the world were found to be holding large amounts of bad debt. As a result, financial markets worldwide crashed.
Nifty 50 experienced its biggest fall on 23rd March 2020, when it fell by 12.98% or 1,135.20 points to a 4-year low of 7,610.25 points. This crash is reported to be a result of lockdowns in several districts of India.
