Trading just on company-specific information might not be sufficient for a market participant. Understanding the events that affect the markets is also crucial. The performance of stocks and markets in general is significantly influenced by a variety of external factors, including economic and/or non-economic events. RELATED: - WHAT ARE CORPORATE ACTIONS AND HOW DO THEY AFFECT STOCK PRICES? - theindusa.com HOW TO BECOME A DISCIPLINED TRADER? - BEST SOLUTION. - theindusa.com Monetary Policy The Reserve Bank of India (RBI) uses monetary policy as a tool to manage the money supply through regulating interest rates. They adjust interest rates to do this. India's central bank is called the RBI. The central bank of every nation on earth is in charge of deciding on interest rates. The RBI must achieve a balance between growth and inflation while determining interest rates. In a nutshell, if interest rates are high, borrowing costs are also high (especially for businesses). Corporate expansion is impossible if borrowing is difficult. If businesses don't expand, the economy sputters. On the other hand, borrowing is simpler when interest rates are low. This results in both businesses and consumers having more money. Increased spending results from having more money, thus retailers tend to raise prices, which causes inflation. The RBI must take into account all the variables and should cautiously fix a few key rates in order to achieve balance. An economic upheaval can result from any imbalance in these rates. The following are the important RBI rates that you should monitor: Repo Rate - Banks can borrow money from the RBI whenever they need to. The repo rate is the interest rate at which the RBI loans money to other banks. A high repo rate indicates a high cost of borrowing, which results in a sluggish expansion of the economy. In India, the repo rate is at 8%. Markets dislike the RBI's decision to raise the repo rate. Reverse repo rate - The rate at which the RBI borrows money from banks is known as the reverse repo rate. Banks are happier to lend money to RBI than to a business since they are confident that RBI won't default when they do so. However, the amount of money in the banking system declines when banks decide to lend money to the RBI rather than the corporate entity. Reverse repo rate increases tighten the money supply, which is bad for the economy. The current reverse repo rate is 7%. Cash reserve ratio (CRR) – Every bank is mandatorily required to maintain funds with RBI. The amount that they maintain is dependent on the CRR. If CRR increases then more money is removed from the system, which is again not good for the economy. The RBI meets every three months to discuss rates. The market keeps an eye out for this important occasion. Interest rate-sensitive stocks from a variety of industries, including banks, automobiles, housing finance, real estate, metals, and others, would be among the first to respond to rate changes.

1. MAJOR EVENTS THAT AFFECTED THE STOCK MARKET
Trading just on company-specific information might not be sufficient for a market participant.
Understanding the events that affect the markets is also crucial. The performance of stocks and
markets in general is significantly influenced by a variety of external factors, including economic
and/or non-economic events.
RELATED: - WHAT ARE CORPORATE ACTIONS AND HOW DO THEY AFFECT STOCK
PRICES? - theindusa.com
HOW TO BECOME A DISCIPLINED TRADER? - BEST SOLUTION. - theindusa.com
Monetary Policy
The Reserve Bank of India (RBI) uses monetary policy as a tool to manage the money supply
through regulating interest rates. They adjust interest rates to do this. India's central bank is
called the RBI. The central bank of every nation on earth is in charge of deciding on interest
rates.

2. The RBI must achieve a balance between growth and inflation while determining interest rates.
In a nutshell, if interest rates are high, borrowing costs are also high (especially for businesses).
Corporate expansion is impossible if borrowing is difficult. If businesses don't expand, the
economy sputters.
On the other hand, borrowing is simpler when interest rates are low. This results in both
businesses and consumers having more money. Increased spending results from having more
money, thus retailers tend to raise prices, which causes inflation.
The RBI must take into account all the variables and should cautiously fix a few key rates in
order to achieve balance. An economic upheaval can result from any imbalance in these rates.
The following are the important RBI rates that you should monitor:
Repo Rate - Banks can borrow money from the RBI whenever they need to. The repo rate is
the interest rate at which the RBI loans money to other banks. A high repo rate indicates a high
cost of borrowing, which results in a sluggish expansion of the economy. In India, the repo rate
is at 8%. Markets dislike the RBI's decision to raise the repo rate.
Reverse repo rate - The rate at which the RBI borrows money from banks is known as the
reverse repo rate. Banks are happier to lend money to RBI than to a business since they are
confident that RBI won't default when they do so. However, the amount of money in the banking
system declines when banks decide to lend money to the RBI rather than the corporate entity.
Reverse repo rate increases tighten the money supply, which is bad for the economy. The
current reverse repo rate is 7%.
Cash reserve ratio (CRR) – Every bank is mandatorily required to maintain funds with RBI. The
amount that they maintain is dependent on the CRR. If CRR increases then more money is
removed from the system, which is again not good for the economy.
The RBI meets every three months to discuss rates. The market keeps an eye out for this
important occasion. Interest rate-sensitive stocks from a variety of industries, including banks,
automobiles, housing finance, real estate, metals, and others, would be among the first to
respond to rate changes.
Inflation
A consistent rise in the average cost of goods and services is referred to as inflation. The value
of money decreases as inflation rises. If all else is equal, inflation is to blame for the price
increase if the price of 1 kg of onions went from Rs. 15 to Rs. 20. Although inflation is
unavoidable, a high inflation rate is not preferred because it may cause economic unrest. A high
inflation rate typically sends the markets the wrong message. Governments strive to bring
inflation down to a tolerable level. An index is typically used to calculate inflation. Inflation is
growing if the index increases by a particular percentage point, while inflation is cooling if the
index decreases.

3. There are two types of inflation indices – Wholesale Price Index (WPI) and Consumer Price
Index (CPI).
Wholesale price index (WPI) - The wholesale price index, or WPI, tracks changes in wholesale
pricing. When they are sold between businesses rather than to actual customers, it reflects the
price change. WPI is a simple and practical way to compute inflation. The inflation that is being
monitored here, however, is institutional in nature and may not accurately reflect inflation that
consumers actually experience.
Consumer Price Index (CPI)- The CPI on the other hand captures the effect of the change in
prices at a retail level. As a consumer, CPI inflation is what really matters. The calculation of CPI
is quite detailed as it involves classifying consumption into various categories and subcategories
across
urban and rural regions. Each of these categories is made into an index. This means the final
CPI index is a composition of several internal indices.
The CPI is calculated in a very precise and thorough manner. One of the most important metrics
for analyzing the economy is this one. The Ministry of Statistics and Program implementation
(MOSPI), a national statistical organization, releases the CPI figures around the second week of
each month.
Index of Industrial Production (IIP)
The Index of Industrial Production (IIP) measures the nation's industrial sector's progress over
the short term. The Ministry of Statistics and Program implementation makes the information
available each month, along with information on inflation (MOSPI). As its name implies, the IIP
uses a fixed reference point to measure production in Indian industrial sectors.
The ministry receives production data from around 15 different industries, compiles it, and then
publishes it as an index number. If the IIP is rising, this is a good indicator for the economy and
markets since it denotes a dynamic industrial environment (as production is rising). A declining
IIP is a bad omen for the economy and markets since it denotes a slow-moving production
environment.
In conclusion, an increase in industrial production is advantageous for the economy, whereas a
decrease raises concerns. The Index of Industrial Production is becoming more significant as
India's industrialization progresses. A lower IIP number puts pressure on the RBI to lower the
interest rates.
Purchasing Managers Index (PMI)
An economic indicator called the purchasing managers index (PMI) aims to represent business
activity in both the country's manufacturing and service sectors. This indicator is based on a
poll, and the respondents—typically buying managers—indicate how their view of the business
has changed over the previous month. Each sector—manufacturing and services—receives a

4. separate survey. The survey's information is combined into one document. The poll often covers
topics like new orders, output, business expectations, and employment, among others.
The PMI value often fluctuates between 50 and 60. An economic expansion is indicated by a
reading above 50, and a contraction is indicated by a reading below 50. And a reading of 50
suggests that the economy has not changed.
Budget
The Ministry of Finance addresses the nation's finances in depth during the Budget. A budget
presentation is made to the entire nation by the finance minister on behalf of the ministry. Major
economic and policy announcements are made during the budget, and these statements have
an effect on a range of market sectors and industries. Consequently, the budget is crucial to the
economy. To further demonstrate this, consider that raising the tobacco tax was one of the
budget's (July 2014) assumptions. As was to be expected, the finance minister increased the
taxes on cigarettes during the budget, which led to an increase in the price of cigarettes as well.
A higher cigarette price has the following effects:
a) Although this is arguable, higher cigarette prices deter smokers from purchasing cigarettes,
which lowers the profitability of cigarette manufacturing businesses like ITC. Investors may wish
to sell shares of ITC if profitability declines.
b) Because ITC is an index heavy weight, the markets will decline if traders start selling ITC.
Budget announcements take place in the final week of February each year. But in some
exceptional cases, such a new government formation, the budget declaration might be
postponed.
Corporate Earnings Announcement
Perhaps this is one of the significant occurrences to which the stock market responds. The
quarterly earning numbers, commonly known as the quarterly earnings data, must be disclosed
once a quarter by the listed companies (those trading on the stock exchange). The corporate
discloses information about numerous operational activities, including, during an earnings
statement.
How much money has the business made?
How has the business handled its spending?
How much did the business pay in taxes and interest fees?
What was the quarter's profitability?
Additionally, some businesses include a summary of what they anticipate for the next quarters.
This projection is known as "corporate guidance."

5. Infosys Limited always makes the quarterly release first among the blue-chip companies. They
frequently offer advice as well. Market participants pay close attention to Infosys' forecast
because it affects the markets as a whole.
Every quarter when the company declares their earnings, the market participants match the
earnings with their own expectation of how much the company should have earned. The market
participant’s expectation is called the ‘street expectation’. The stock price will react positively if
the company’s earnings are better than the street expectation. On a similar logic, the stock price
will react negatively if the actual numbers are below the street expectation. If the street
expectation and actual numbers match, more often than not the stock price tends to trade flat
with a negative bias. This is mainly owing to the fact that the company could not give any
positive surprises.
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