7 events that influenced Indian markets in 2014 - Yahoo India Finance

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7 events that influenced Indian markets in 2014

Simplus Information Services 8 hours ago

What a year 2014 has been. The BSE Sensex jumped 30% this year. The rupee remained largely stable after the free fall
seen in 2013. In fact, it is one of the best performing currencies compared to its emerging market peers. The economy
seems to be on the verge of an upturn. Analysts are bullish about the markets.
Much of this has been caused by some key events that took place this year. Here is a look at seven of the most important
events that affected the economy in 2014:

1. New government: The year saw a regime change for the government. The Bharatiya Janata Party won the elections
with a whopping majority after a successful election campaign that highlighted the need for reforms. Markets too jumped
on hopes that the new government would pass reforms required to get the economy back on the growth path. On the day
of the election results, the Sensex jumped over 1000 points. By the time the new government led by Prime Minister
Narendra Modi took oath, the Sensex went to 24,700 from 22,300 levels.
2. New reforms: The new government set to task immediately after forming government. It announced changes to the
labour laws some of which were decades old; allowed more foreign investment in sectors like infrastructure and real
estate; changes in pension rules; announced new insurance rules as well as the much-awaited Goods and Services Tax.
Some of these are pending approval in the Lok Sabha.
3.Oil prices fall: Prices of crude oil in the international markets is trending at $60 per barrel. This is down from
$110/barrel-levels at the start of the year. A key reason for this fall has been the reduction in imports by the US. America
has now become the largest producer of oil even though it does not export. As import demand for oil falls, prices trend
lower. This $50 fall has benefitted India, which imports nearly 70% of its oil needs every year. However, whenever the
price of oil falls, the US dollar rises against other currencies. As a result, the rupee rose to Rs 63/$-levels again in
December.
4.Diesel deregulation: The Indian government subsidises fuel prices. It compensates the fuel-selling companies for
their loss. This, in turn, increases the governments expenditures. In 2014, the government decontrolled diesel prices,
allowing companies to sell oil at market prices. This was possible mainly because international prices remained low. As a

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7 events that influenced Indian markets in 2014 - Yahoo India Finance

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https://in.finance.yahoo.com/news/7-events-that-influenced-indian-markets...

result, companies announced a cut in diesel prices after the deregulation. Diesel cost Rs 54.34 in New Delhi and Rs 62.6
in Mumbai per litre at the start of the year. It now costs Rs 50.51 in Delhi and Rs 57.91 per litre in Mumbai.
5.Fall in inflation: Inflation has been one of Indias biggest problems. It remained elevated for a long period of time,
often growing at a rate over 10%. This year brought cheer on this end too. Inflation fell the entire year to new multi-year
lows. Wholesale price inflation grew 0% in November, while retail inflation grew 4.4%, as per the latest data. This has
been predominantly because of a fall in global oil prices. Food inflation, which grew 15.4% in November 2013, is down to
3.1% in the same month in 2014. This is good news, as high inflation eats into the value of money. A continuous fall in
inflation also could open doors for a cut in interest rates by the Reserve Bank of India. This could help spur growth.
6.End of quantitative easing: In May 2013, the US Federal Reserve announced its intentions to cut down its bond
purchases, called the Quantitative Easing programme. The US central bank infused money into the US markets through
this programme. This money found its way into riskier emerging markets like India. The announcement led to market
crashes around the world. The Indian market was the most affected. 2014 has seen a reversal of this effect. The US central
bank slowly reduced its bond purchases to finally end the programme in October this year. Despite that, foreign investors
continued investing in India as the underlying economy and fundamentals improved. The US central bank also indicated
it may hike interest rates next year.
7.Coal block cancellations: This was perhaps one of the most surprising developments in the year. In September, the
Supreme Court cancelled 214 coal blocks, which were allotted between 1993 and 2011. It gave the companies six months
to return the blocks to the state-owned Coal India. Metal stocks fell sharply as a result of the announcement. Jindal Steel
and Power was the most affected, losing around eight mines. The government now plans to auction the blocks in a fresh
round. This is expected to take place in February 2015.

12/23/2014 5:39 PM