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6 Major Problems that currently effect the Indian Financial Market

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Problems of The Indian Financial Market

The economy and the financial market are having a close relationship and are interdependent. With a change in the economic scenario the change is reflected in the financial market, while on the other hand the change in the financial market is reflected in the economy as well. There are many factors which affect the financial market of the nation. Some of the notable ones are as follows:

  • Political Effect
  • Economical Effect
  • Social Effect
  • Global effect
  • Extraterrestrial Effect
  • Inter terrestrial Effect

1) Political Effect The politics and the working of the government affect the financial market greatly. The policies formulated by the government and its working are largely reflected in the market. For example: The election conducted in India where the whole Indian population takes part pan India to select the government, affected the stock market largely. The individual investors are not determined to risk their investments at large which are reflected in the stock market. For example: The West Bengal election saw a lot of ups and down leading to the end of Left era in the state which affected the stock market.

2) Economical Effect – The economic reforms formulated by the economists and the planning commission affect the stock market adversely. Be it the Railway budget or the union budget, it had an effect on the stock market. The policy changes proposed and incorporated by the finance minister shows an effect in the market. For example: The announcement of FDI in retail and aviation led to a steep rise in the market.

3) Social Effect – The societal changes too impact the stock market. These changes create a social pressure due to which the spark of volatility is ignited and the result is seen in the very volatile market, which leads to investors loosing wealth to a large extent.

4) Global effect – After Globalization doing the major job, all the economy has become open to each other. The global economy and the working of major super powers, which includes The problem of Quantitative Easing, which created a problem for the Indian market in its second version is being implemented again by the United States. Also the second recession which hit the Euro zone resulted in a global slowdown, as a result of which the global investors were seen withdrawing their investment from the Indian stock market to a great extent. The negative news only adds volatility to the market which results in the investors losing out their wealth.

5) Extra-Terrestrial Effect РThis resembles the relationship an economy maintains with the neighboring countries. The 26/11 terrorist attack in Mumbai, the financial capital of India which was India’s 9/11, affected the stock market adversely. The stocks of the major players were seen to decline as the FII were withdrawn and the small individual investors went down to withdraw their money from the market seeing its volatility, despite suffering losses. Thus the relationship with the neighborhood countries and global status as a whole too affect the market.

6) Intra-terrestrial Effect – Are the happenings taking place within the territory of the nation. The intra-state or the interstate tussle which creates political imbalance in the economy, affects the stock market. The uprising which demanded for a new state of Telangana showed a negative impact on the Indian stock market. The protest of Anna Hazare too showed its impact on the market.


Thus we can see that the Indian economy is currently facing several problems from all the 360 degrees. Many of the factors are within the economy and several are outside the terrestrial region of the economy. It is very important that under such situation the economy needs to plan the policy reforms accordingly to tackle the problems which are vital in nature and can be overcome by decision making.


Niraj Satnalika

Niraj is an MBA in International Business (Finance). Prior to this he completed B.Tech in Electronics and Instrumentation. He is currently working with Confederation of Indian Industry (CII), Kolkata in capacity of Consultant. Satnalika is actively involved with an NGO and works towards promoting education among the underprivileged.

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