Understanding drivers of stock market is very important as it plays a key role in investment decisions.

1. Political Stability and Economy

a. A government should be formed and run by a dominant party to enable swift decision-making regarding progress, fostering a positive sentiment in the economy.
b. When the repo rate increases, banks raise their lending rates, causing companies with high debt to pay more in interest, which ultimately reduces their profits. Therefore, it is advisable to avoid companies with excessive debt.
c. As the repo rate rises, investors are drawn to risk-free returns of 8% to 10% offered by banks, prompting them to withdraw funds from the stock market. This shift, governed by the principles of supply and demand, can lead to a decline in stock prices. Conversely, a decrease in the repo rate encourages more inflows into the market.
d. While GDP is not directly correlated with stock market performance, GDP growth is a key indicator of overall sentiment regarding a country's economic health.
e. The Buffett Indicator provides insight into the valuation of the entire market; it is the ratio of the total market capitalization of all businesses to the country's GDP:

• 69% < Ratio ≤ 89%: Modestly Undervalued

• 89% < Ratio ≤ 108%: Fairly Valued

• 108% < Ratio ≤ 128%: Modestly Overvalued

• Ratio > 128%: Significantly Overvalued

2. FII & DII

a. FII stands for Foreign Institutional Investors, while DII refers to Domestic Institutional Investors. These entities invest substantial amounts of money after conducting thorough research, including trusts, mutual fund houses, and wealthy individuals. Their investments play a crucial role in market movement and are generally seen as a positive sign for the companies they invest in.

3. Events

a. The COVID-19 pandemic led to an economic slowdown, significantly impacting markets due to disruptions in the trade of goods and services, rising commodity prices, and deteriorating financial conditions, creating economic challenges across many countries.
b. Recent earthquakes in Turkey have also affected the supply chain for oil and food grains, further complicating global economic dynamics.

4. Oil & Dollars

a. Geopolitical issues significantly influence global oil prices. Oil is a fundamental resource for many industries in our country; thus, an increase in oil prices raises raw material costs across various sectors, impacting profit margins.
b. OPEC (Organization of the Petroleum Exporting Countries) plays a crucial role in controlling oil prices. This coalition of oil-producing nations decides the amount of oil to supply to the global market, affecting pricing and availability.