Stock Market: Impact of Global Oil Price and elections

If you tend to follow the movements of stock markets closely, you will know that factors like global oil price and LokSabha Elections influence the stock market in a significant way. A hike in global crude-oil prices and central elections has an impact that adds chaos to an already volatile market, which challenges the investment capacity of short-term and medium-term investors to quite an extent by hindering their flow of returns.

The reason why global oil and elections are important for the stock market

The growth of the Stock market is extremely crucial for the growth and prosperity of the country’s economy which is an image of the country’s state.

The following highlights the influence of elections on the Stock market:

  • One single election can have a huge positive and negative impact in the immediate short-term, medium-term and the long-term.
  • The NIFTY doesn’t really show such negative returns during the pre and post phases of the election. However, the SENSEX tend to show mixed returns around the pre and post phase of the election.
  • It is considered that the volatility generated in the stock market during the pre-election period tends to subside in the long-term when compared to the immediate effect in the short-term and mid-term. Therefore, Election has a more intense effect in the short and mid-term which tends to reduce over the long-term.
  • Investors who plan to brave the market around the election phase should be cautious on the days closest to the election to be shielded from the intense volatility of the market. However, the speculators can earn extra income during the volatile phase by adopting investment strategies.

The following highlights how Global oil prices influence the stock market:

  • A mild rate of inflation caused by a slight hike in global oil prices is deemed favourable for stocks like the real assets. However, a rapid and continuous increase in global oil prices shows more negative impacts than positive.
  • A sharp increase in the prices of global oil tends to diminish the profit margin of a company because almost every industry needs crude oil to operate.
  • Increase in global oil prices increases the inflation level which makes it difficult for the consumer to sustain in their limited income. The hike in FMCG products, services, electricity, gasoline and medical necessities limits the scope of savings and restricts the flow of fresh and continuous investment in the stock market.
  • The increased rate of inflation further lowers customers’ interest to buy more goods and services this directly dampens the source of revenue and income of most companies and lowers their stock shares in the market.

To be able to tackle the volatile phase of the market during the election phase and amidst the rising global oil prices invest in quality stocks and diversify your investment portfolio on a regular note. If you wish to avail more tips for tackling the volatile vibes, consult our experienced financial analysts and advisors to gain more insights.

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