Foreign Portfolio Investment (FPI) inflows into India
US 1st Quarter 2019 growth estimate and February 2019 jobs report
How are the Indian and global economic environments affecting the financial markets?
The services sector in India is performing strongly while growth is dampening in manufacturing and agriculture. The global economic environment has resulted in lower growth forecasts of the Indian economy in 2019 and 2020 because of slowing international trade. However, globally, on a relative basis, India continues to be the fastest growing major economy despite signs of slowing growth among the large economies including the United States in 2019. Efforts to support growth both by the Reserve Bank of India (RBI) and the incumbent government before the general elections in May 2019 are attracting FPI inflows leading to large buys across industry sectors, pushing up the equity market indices.
Within the context of Brexit, European growth and monetary policy, and US-China trade talks, US economic growth expectations in the 1st quarter of 2019 are significantly lower compared to the 4th quarter of 2018. This could be more because of the longest government shutdown in US history and the bottoming of unemployment and affects on growth of Trump tax cuts. After all, US may not be immune to growth slowdown which is being experienced around the world. The US Federal Reserve is taking a second look at its monetary policy stance under these conditions by signaling a slow down or even stopping monetary tightening.
What to expect from the markets next week?
Indian financial markets, once the affects of FPI inflows wane, could be range-bound and perhaps even flat.