The last 2 years 2020 and 2021 have been the worst years of social, market, and economic downfalls around the world, with covid being the main reason for the catastrophes. With new variants announced every few months the covid marathon was going steady and now finally it looks like there is a finish line and it’s about to end.
However, another tragic situation has emerged between a superpower and a European country. The conflict responsible has been on top of news cycles for the last 3 days. ‘Russia begins an invasion of Ukraine’ or ‘Russia invades Ukraine’ have been the headlines around the world. The conflict has resulted in an outpour of support towards Ukraine and a rising fear of what Russia may do next.
In between all the social situations that have gotten worse, the economic situation has also been affected and will be affected for the long term.
The global oil prices have surged and the stock market responded when Sensex, The Bombay stock exchange’s sensitive index crashed 2800 points or 4.27% on Thursday. Nifty fell 815.30 points.
The surge in oil prices is going to have an impact on India’s inflation. According to a report by the Bank of Baroda, an increment of 10% in the price of crude oil is going to increase the Wholesale Price Index in India by about 0.9%. A tightening of monetary policies will be needed to curb inflation which the Reserve Bank of India will execute in the current year.
The current account deficit will widen affecting the import and export of goods and services. A 10% rise in oil prices will result in an increase of $15 billion of the country’s current account deficit, equivalent to 0.4% of India’s GDP. This will have a negative impact on India’s economy and the stock market.
The rise in fuel prices will lead to neglect from consumers buying new vehicles, which may lead to a fall in automotive stocks. This is why the makers of vehicles need to move faster towards electrification. The conflict might not directly affect the stock market yet, but in the coming months, the situation can be different depending on what happens next.
However, one shouldn’t stop investing and maintain the discipline for long-term gains. Investors are buying when the markets are down to gain when the markets rise back up once again. People who are not disciplined with saving and investing will suffer the rising prices situation. Any savings would turn out to be helpful. One’s who are investing a larger amount in mutual funds through monthly sip can reduce that amount for a certain period to fulfill their household needs but make sure to let the investments stay intact as much as possible.
The stock market is still relevant to invest in and will continue to be a risky but lucrative way to generate wealth for the future.
Disclaimer: The views and references made above are those of the respective individual (Author), and not of Empireweekly.com.