How can one open a demat account? Here are 4 simple steps to follow Rising GDP typically elevates inflation. Moderate inflation indicates a healthy economy. An increase in prices in general can loosely be termed as inflation.
However, extremely high inflation can severely impact an economy. High prices tend to adversely impact demand in the economy and in turn, pull down corporate earnings. Extremely high inflation impacts stock prices in general.
In India, inflation is within the permissible range of 2-6 per cent set by the Reserve Bank of India. This is another reason why there is buoyant sentiment in the Indian markets. Sometimes traders wonder why the stock markets go up when inflation is higher than the previous month.
This sometimes can be attributable to better-than-expected inflation numbers. While trading, market participants need to factor in how much expectations are already built into the market prices. Also Read: Market lacks fresh triggers; see value in banking, financial stocks: Taher Badshah of Invesco Mutual Fund (Exciting news! Mint is now on WhatsApp Channels. Subscribe today and stay updated with the latest financial insights! Click here!) Striking a balance between rising economic growth and containing inflation is a dual objective of the monetary policy of most central banks in the world.
One of the key weapons in their arsenal is interest rates. When interest rates are hiked it tends to pull down the demand for goods and services, and thereby corporate earnings. The consequence of high interest costs is lower corporate profits.
Read more on livemint.com