Inflation and how it effect to share market. how we beat the inflation.

1. INFLATION and it’s EFFECT ON EQUITY
MARKET
Presented By-
Shreeparna
Shalini
Ragini
Akash
Gopu

2. What is Inflation?
“Inflation is nothing but the reduction in value of money”

3. Deflation is when the general level of prices is falling. This
is the opposite of inflation.
Hyperinflation is unusually rapid inflation. In extreme
cases, this can lead to the breakdown of a nation's monetary
system. One of the most notable examples of hyperinflation
occurred in Germany in 1923, when prices rose 2,500% in one
month!
Stagflation is the combination of high unemployment and
economic stagnation with inflation. This happened in
industrialized countries during the 1970s, when a bad
economy was combined with OPEC raising oil prices.
Types of Inflation

4. Factors influencing inflation
 Food Prices
 Fuel Prices
 Commodities
 Fringe Services
 Growing income
Levels
 Developed Lifestyle
 Government Policies

5. Measurement of Inflation
Wholesale Price
Index
Consumer Price
Index
WPI does not pick up the reduction is taxes that the states
announce because that’s something that happens in the retail
and therefore does not give the consumer the true picture
about commodity prices .Therefore, CPI is better than WPI for
measurement of Inflation.

6. 10
9.4
5.8
4.9
4.5
3.6
4.77 4.89
4.57
4.26 4.09
0
2
4
6
8
10
12
INFLATIONRATECOMPAREDTOPREVIOUSYEAR
India: Inflation rate from 2012-2022
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

7. Wage price Spiral
Rising
Costof
Living
Indexation
of wages
Higher
wages
Increased
demandof
goods
Higher
Prices

8. Impact of Inflation
Rateof Inflation Impact
0-3% - Low Recession in Economy
3-5% - Moderate Growth in Economy
Above 5% - High Threat to Economy

9. When the Inflation is high:INFLATION
STOCK High
inflation
Increase
price of
G&S
Investor
demand
rise
Interest
rate
increases
Expenses of
companies
increase
Profit
goes
down
Stock
prices go
down
Negative Relation
Reasons

10. STOCK Price
falls
Competition
increases
Demand
drop
Production
slows
down
Unemploy-
ment
increases
Profit
decreases
Stock
market
goes down
DEFLATIONIn case of Deflation
Negative Relation
Reasons

11.  Inflation tends to discourage investment and Long term economic growth.
Inflation creates a uncertainty for both companies and public. Stock Market
Listed Companies will postpone their investment and production due to
uncertainty in the market. This will result in negative economic growth for
the company and also the Indian economy
 Inflation Reduces value of savings. Inflation leads to a fall in the value of
money. High Inflation in Economy eats out your savings, as people will
have to spend more to maintain there living.
 Inflation affect people who have constant incomes, like retired persons,
students etc. Inflation eats there purchasing power and their standard of
living.
 inflation leads to social unrest in the economy. Labour Strikes for increase
in wages could hamper the economy and also the companies who employ
those labours.
Impact of High Inflation on Economy and
Stock market

12. Effect of low inflation
Interest rate and Inflation
Effect of high inflation
1. interest rate is increased.
2. This makes borrowing expensive.
3. The money supply will fall down.
4. People having lesser money to
spend on goods and services.
5. This, in turn, will lead to a fall in
the demand for goods and
services.
6. The price of goods and services
will fall.
1. The interest rate is reduced.
2. Borrowing will increase.
3. The money supply is also
increase.
4. People will have more money to
spend on goods and services.
5. The demand for goods and
services will increase.

13. Impact of high inflation on Capital
Market
Inflation translates into higher costs and lower
returns
Foreign investors get disenchanted
Discourages foreign Capital
Volatility in Stock Market

14. Impact of high inflation on investors
Investors
Loss in the value of interest on savings
Less keen to savings in future
Less investment
Real time loss to whole economy

15. How to Beat Inflation
The compounding impact of such investments over long periods
will help you beat inflation by a comfortable margin. INVEST IN
DIVIDEND-PAYING STOCKS: One good way of staying ahead of
inflation is buying stocks that pay good dividends. Interest rate
offered by banks is usually much less than the inflation rate.
1. Keep Cash in Money Market Funds or TIPS
2. Avoid Long-term Fixed Income Investments
3. Emphasize Growth in Equity Investments
4. Commodities Tend to Shine with Inflation
5. Inflation is Usually Kind to Real Estate
6. Convert Adjustable-Rate Debt to Fixed-Rate
SIX way to beat Inflation :

16. Inflationary premise
“Do not keep your money stagnant.”

17. Conclusion
Neither very high inflation , nor negative
inflation(deflation) is good for stock
market, the INFLATION should increase
at moderate .
When is the inflation is moderate , stock
market should continue to grow at its
usual rate in addition to the rate of
inflation.

18. Thank
You…