Economic Roundup, September 20, 2019

Economic Environment

  • Corporate tax cut

How are the Indian and global economic environments affecting the financial markets?

The financial markets rose for the week following the finance minister’s announcement of a 5% corporate tax cut. This tax expenditure could increase the budget deficit unless it helps trigger economic recovery and accelerates growth to raise the tax revenue.

On the global front, both the US Federal Reserve and the European Central Bank cut interest rates to support economic growth in the United States and to revive the economy in Europe. This is a boost to the markets on the one hand and on the other hand it confirms market worries about future economic growth.

What to expect from the markets next week?

Selling pressure will remain on the financial markets especially given the situation in Saudi Arabia and the US trade war with China. Still, despite slowing growth, on a relative basis, India continues to be the destination for foreign institutional investors as it is remains the world’s fastest growing major economy.

Economic Roundup, September 13, 2019

Economic Environment

  • Index of Industrial Production (IIP) and  inflation
  • Oil price

How are the Indian and global economic environments affecting the financial markets?

IIP has grown but at a slower rate indicating slowdown in the manufacturing sector. Inflation is lower than the Reserve Bank of India target of 4%. But developments over the weekend in Saudi Arabia suggest that until the issue of attacks on Saudi oil facilities is resolved, global oil prices could see a spike and any upside price persistence could transmit to inflation and pressure on India’s foreign exchange reserves further pressuring an economy already under stress. The uptick in the Indian financial markets because of efforts by the central government to restore growth could be short lived.

What to expect from the markets next week?

Selling pressure will be persistent on the financial markets especially given the situation in Saudi Arabia. Still, despite slowing growth, on a relative basis, India continues to be the destination for foreign institutional investors as it is remains the world’s fastest growing major economy.

Economic Roundup, September 06, 2019

Economic Environment

  • Growth
  • Reserve Bank of India (RBI) monetary policy

How are the Indian and global economic environments affecting the financial markets?

India’s gross domestic product growth is slowing further, in pace with economic slowdown around the world. RBI policy is expected to stay on the path of easing on October 4th, when the Monetary Policy Committee (MPC) meets next, along the lines of monetary expansion by major global central banks. Though fiscal expansion will cut into the government’s target for budget deficit, it may be necessary to boost the economy. Selling pressure will continue to build on the financial markets.

What to expect from the markets next week?

Selling pressure will remain on the financial markets. Still, despite slowing growth, on a relative basis, India is the destination for foreign institutional investors. Any news from the central government on fiscal easing could boost the markets.