Here are some important indicators to note while studying the market fluctuations:
1- Gross Domestic Product
Gross Domestic Product or GDP is a crucial economic indicator. It is measured by either summing up the economy’s earned income or spending power. Both measures are equally accurate. The GDP directly affects inflation and impacts the stock market. It has been recognized as a key indicator of a country’s economy and impacts the future of investors. When GDP gets hit, it puts the market in a tailspin making the stock rates cheaper.
2- Interest Rates
The happening at the Reserve Bank of India has a direct impact on the stock market. The RBI directs the interest rates in our country and they keep changing to stabilize the Indian economy. A higher interest rate means that a company has to pay higher on loans, affecting their profits. This will naturally reduce the stock prices.
Inflation is defined as the decline in purchasing power of a currency at a particular time. It determines the real value of an investment. To combat market risk, a risk premium that is higher than the current rate of inflation is maintained. Lower inflation makes a dip in company prices and increases their profits. And hence, low inflation is better for the market.
4- Consumer Activity
Consumer behavior impacts the stock market directly. It is important to keep a track of consumer’s spending patterns. When people are secure about their jobs, consumer confidence rises. More people make large purchases and corporate profits rise. That's something to watch for. The Consumer Confidence Index is one of the leading indicators that determine market fluctuations.
5- Investor Activity
India recorded the highest ever FII inflows of 37.6 billion dollars in the FY2021, says an article in Business Standard. Other crucial indicators are FDI and FII flows in the markets. Department for Promotion of Industry & Internal Trade regulates the Foreign Direct Investment (FDI) policies. These policies create a great impact on the investors these days.
Various research firms and large investment firms publish their reports and mention these key indicators. Other factors that impact the stock market include government regulations such as FDI policies and government subsidies. Investors should also keep an eye on booming sectors, cyclical sectors, and macro and microeconomic factors. You can also take guidance from certified professionals who provide personal financial assistance to help you to make informed decisions for investing in stock markets