Factors affecting capital market in India :The capital market is affected by a range of factors .

Some of the factors w h i c h influence capital market are as follows:A)Performance of domestic companies:The performance of the companies or rather corporate earnings is one of the f a c t o r s which has direct impact or effect on capital market in a country. W e a k corporate earnings indicate that the demand for goods and services in the economy isless due to slow growth in per capita income of people . Because of slow growth indemand there is slow growth in employment which means slow growth in demand int h e n e a r f u t u r e . T h u s w e a k c o r p o r a t e earnings indicate average or not so good p r o s p e c t s f o r t h e e c o n o m y a s a w h o l e i n t h e n e a r t e r m . I n s u c h a s c e n a r i o t h e investors ( both domestic as well as foreign ) would be wary to invest in the capital market and thus there is bear market like situation. The opposite case of it would berobust corporate earnings and its positive impact on the capital market. The corporate earnings for the April June quarter for the current fiscal hasbeen good. The companies like TCS, Infosys,Maruti Suzuki, Bharti Airtel, ACC, ITC,W i p r o , H D F C , B i n a n i cement, IDEA, Marico Canara Bank, P i r a m a l H e a l t h , I n d i a cements , Ultra Tech, L&T, Coca- Cola, Yes Bank, Dr. Reddys Laboratories, orientalbank of Commerce, Ranbaxy, Fortis, Shree Cement ,etc have registered growth in net profit compared to the corresponding quarter a year ago. Thus we see companiesf r o m I n f r a s t r u c t u r e s e c t o r , F i n a n c i a l S e r v i c e s , P h a r m a c e u t i c a l s e c t o r , I T S e c t o r , Automobile sector, etc. Doing well . This across the sector growth indicates that theindian economy is on the path of recovery which has been positively reflected in thestock market( rise in sensex & nifty) in the last two weeks. (July 13-July 24). B)Environmental Factors :Environmental Factor in Indias context primarily means- Monsoon . In India around 60 % of agricultural production is dependent on monsoon. Thus there is h e a v y dependence on monsoon. The major chun k of agricultural production comes fromthe states of Punjab , Haryana & Uttar Pradesh. Thus deficient or delayed monsoon inthis part of the country would directly affect the agricultural output in the country. A p a r t f r o m monsoon other natural calamities like Floods, tsunami, d r o u g h t , earthquake, etc. Also have an impact on the capital market of a country. The Indian Met Department (IMD) on 24 Th

June stated that India would receive only 93% rainfall of Long Period Average (LPA). This piece of news directly had an impact onindian capital market with BSE Sensex falling by 0.5 % on the 25 Th J u n e . T h e m a j o r losers were automakers and consumer goods firms since the below normal monsoonforecast triggered concerns that demand in the crucial rural heartland would take a

Hit. This is because a deficient monsoon could seriously squeeze rural i n c o m e s , reduce the demand for everything from motorbikes to soaps and worsen a slowingeconomy. C)Macro Economic Numbers :The macro economic numbers also influence the capital market. It includes Index of Industrial Production (IIP) which is released every month, annual Inflation numberindicated by Wholesale Price Index (WPI) which is released every week, Export I m p o r t n u m b e r s w h i c h a r e d e c l a r e d e v e r y m o n t h , C o r e I n d u s t r i e s g r o w t h r a t e ( I t includes Six Core infrastructure industries Coal, Crude oil, refining, power, cementa n d f i n i s h e d s t e e l ) w h i c h c o m e s o u t e v e r y m o n t h , e t c . T h i s m a c r o e c o n o m i c indicators indicate the state of the economy and the direction in which the economyis headed and therefore impacts the capital market in India.A case in the point was declaration of core industries growth figure. The six coreinfrastructure Industries Coal, Crude oil, refining, finished steel, power & cement grew 6.5 % in June , the figure came on the 23 Rd of July and had a positive impact onthe capital market with the sensex and nifty rising by 388 Points & 125 Pointsrespectively.

D)Global Cues :In this world of globalisation various economies are i n t e r d e p e n d e n t a n d interconnected. An event in one part of the world is bound to affect other parts of the world , however the magnitude and intensity of impact would vary. Thus capital market in India is also affected by developments in other parts of the world i.e. U.S. , Europe, Japan , etc.G l o b a l c u e s i n c l u d e s c o r p o r a t e e a r n i n g s o f M N C s , c o n s u m e r c o n f i d e n c e i n d e x i n developed countries, jobless claims in developed countries, global growth outlookgiven by various agencies like IMF, economic growth of major economies, price of crude oil, credit rating of various economies given by Moodys, S & P, etc.An obvious example at this point in time would be that of subprime crisis & recession. Recession started in U.S. and some parts of the Europe in early 2008 .Since then ithas impacted all the countries of the worlddeveloped, developing , less- developedand even emerging economies. E)Political stability and government policies:For any economy to achieve and sustain growth it has to have political stability andpro- growth government policies. This is because when there is political stability thereis stability and consistency in governments attitude which is communicated through

Various government policies. The vice - versa is the case when there is no politicals t a b i l i t y . S o c a p i t a l m a r k e t a l s o r e a c t s t o t h e n a t u r e o f g o v e r n m e n t , a t t i t u d e o f government, and various policies of the government. The above statement can be substantiated by the fact the when the mandate came inupa governments favour ( Without the baggage of left party) on May 16 2009, the stock markets on Monday , 18 Th May had a bullish rally with sensex closing 800 pointhigher over the previous days close. The reason was political stability. Also withoutthe baggage of left party government can go ahead with reforms. F)Growth prospectus of an economy:When the national income of the country increases and per capita income of peopleincreases it is said that the economy is growing . Higher income also means higher e x p e n d i t u r e a n d higher savings.This augurs well for the economy as h i g h e r expenditure means higher demand and higher savings means higher investment. T h u s w h e n a n e c o n o m y i s g r o w i n g a t a g o o d p a c e c a p i t a l m a r k e t o f t h e c o u n t r y attracts more money from investors, both from within and outside the country andvice -versa. So we can say that growth prospects of an economy does have an impacton capital markets. G)Investor Sentiment and risk appetite :-

Another factor which influences capital market is investor sentiment and their risk appetite .Even if the investors have the money to invest but if they are not confidentabout the returns from their investment , they may stay away from investment forsome time.At the same time if the investors have low risk appetite , which they were having in global and Indian capital market some four to five months back duet o g l o b a l f i n a n c i a l m e l t d o w n a n d r e c e s s i o n a r y s i t u a t i o n i n U . S . & s o m e p a r t s o f Europe , they may stay away from investment and wait for the right time to come.