Political uncertainties are among the factors impacting capital markets: RBI

The RBI in its Macroeconomic and Monetary Developments Second Quarter Review 2013-14 said that markets in India face domestic uncertainties arsing from prolonged slowdown, falling corporate earnings and rising leverage, besides risks of political uncertainties associated with the electoral cycle.

Elections are to be held in Chhattisgarh, Madhya Pradesh, Mizoram, Rajasthan and Delhi in November-December 2013. National polls are also due before the term of the current Lok Sabha ends in May 2014.

In the recent past, India’s stock markets have faced volatility on the account of fears of a tapering of the monetary stimulus by the US Federal Reserve and concerns on domestic economy.

However, as per RBI, market uncertainties remain associated with how the debt ceiling issues will play out over the next several months and whether the nascent signs of recovery in the euro area sustain.

Global financial markets also got some relief with the US Federal Reserve decision to maintain the pace of its bond purchases and its signal that withdrawal of quantitative easing may take longer. However, RBI cautioned that the financial markets could be disrupted again when the extraordinary monetary accommodation in the advanced economies is withdrawn.

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