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Impact of Inflation on Stock market in India

Sai stocks an stock Advisory company in Stock Trading as explained What is inflation and how its effect stock market in india. We see every where inflation in our Daily Life. Stock traders, offen talk about rising inflation, which is eating there profits and causing the market to perform badly. Every one in India face the inflation issue We have tried to explain the traders so that they understand what is inflation and also how inflation affects the stock market. A smart trader understands the market as well as the causes that affect the market. If as a intraday trader if you wish to improve your success rate as a stock market trader, you need to understand the relationship between inflation and stock prices of shares.


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What is inflation and What are the Factors that Cause Inflation

We first need to understand what is inflation, and how to prepare your trading strategy so as to counter the inflation and make money. You already know that over the years the cost of living rises. Daily use goods and objects get more costly, and the same amount of money gets you less product. For this rise to be considered inflation, it must be steady and sustained. Inflation erodes the spending power of the public in a country. There are several factors that are responsible for these increases, and any one of them can affect the market. High tax rates, higher spending power, increase in the price of imported raw material, and several such factors need to be considered. The economic status of the country and its annual growth is also a vital factor for rise or fall in the inflation.

How does inflation affect consumption

The income that a person gets can buy fewer things, and thus while the money is put back into circulation, fewer businesses get to profit from it. Consumption thus drops, and people prefer to spend only on what they need, avoiding bonus purchases that drive a lot of industries. India holds major sway over international markets as it currently has a purchasing power parity that is number four in the world. So when inflation reduces consumption, and in turn causes reduced performance for corporations, the stock market responds in kind and become bearish.

Effect of Inflation on Indian companies and the nse stock market

You may have often noticed how the Governor of india Changes RBI Policy of india to revise its rates in times of high inflation in the economy. These new rates are almost always followed by improvement in the stock market prices. The market responds to some stimuli very swiftly, and will often rise when it anticipates a sudden increase in the purchasing power of the general population. In the same manner, when no such announcements are made by RBI, the market takes precautions, and either the stock prices plummet, or stop increasing. Factors like globalisation also play a part, and since Top Performing Indian companies that have an extensive international presence often have to suffer since inflation rates vary from one country to another. Learn to identify such factors, and you will soon find yourself being able to gauge the nse share market trends better, and predict outcomes with greater accuracy. Educate yourself when it comes to all the things that drive the stock market, and you will surely achieve greater success.


Inflation in Indian Economy


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Effects of Inflation on Indian Economy and Stock Market

  • 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 amd production due to uncertainty in the market. This will result in negative economic growth for the company and also the indian economy
  • Inflation Reduce's 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. People prefer not to buy Luxury goods like Cars, Bikes Which affects all those companies.
  • 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.


Sai stocks Advises traders to keep eye on the inflation rates while investing in share market. To Control inflation rate, RBI normally changes its Monetary policy which effect stock market on same day.


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