Page 82 - BFSI CHRONICLE 10 th Issue (2nd Annual Issue ) 23062 COPY.indd

BFSI Chronicle, 2 Annual Issue, 10 Edition July 2022
th
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funds and its resultant wealth accumulation financial market of economies. With changes
and formation. The current economic in macro-economic scenario, the Foreign
developments have forced the institutions Institutional Investors (FIIs) are the earliest
to communicate with forward guidance to to react. A net infow/outflow of FII in the
minimize the volatility and enabling investors financial markets translates into the returns
to rebalance their portfolios by minimizing risk. generated by the associated scripts/securities.
Factors effecting pension wealth Considering the significant weightage of FIIs

Inflation and disposable income in macro as well as micro levels, the liquidity

movements across the borders in anticipation
The recent developments in Eurasia has of any monetary/fiscal changes leads to major
resulted in major trade related disruptions and
price movements. During price discovery,
imbalances. The supply chain of commodities the resultant demand-supply mismatch gets
has been impacted leading to the spike in their reflected in the price of the underlying stock
retail prices in the country of consumption.
and the financial portfolio of the investor.
To add on to the whammy, the crude oil
prices have seen high degree of volatility due Since COVID, the financial markets have seen
to supply shocks. However, to contain its major corrections with the onset of events. The
effects from wholesale to retail levels various equity markets closed significantly lower in
measures have been taken by the Governments March 2020 and similar fluctuations were seen
and Central Banks. Nonetheless, the inflation subsequent to the Eurasia conflict. On the other
has risen to higher levels as compared to the end of the spectrum, GSec yields have risen
previous years and is expected to continue to consistently since 2020 only to be regularly
sustain at such level rather as contemplated to intervened by the Central Banks to balance
be just transitory in nature. between the economic growth objectives and
taming the inflation. The monetary policy
Inflation directly effects the disposable income stance of various Central Banks across the
of the individuals. With the percentage share
globe have moved from being neutral (pre
of necessary commodities increasing in the 2020) to accommodative and now further
consumption basket and the investments towards withdrawal of liquidity for targeting
taking a back seat. The same would also
inflation. However, considering mandate to
impact the quantum of savings done by the control cost of borrowings in the economy
individuals. With change in disposable income
and the ever-evolving dynamics, the Central
irrespective of change in income levels, to banks are bound to increase the interest rates.
sustain credibility an individual would prefer An increase in interest rate would eventually
to risk adjustments and absorption mechanism
reflect in the G Sec yields and the returns of the
by service the existing debt obligations of EMIs underlying portfolio.
regularly rather than maintaining the savings/
investment levels required for an event like For Corporates, the risks and effects are
retirement bound to happen in the future. multinational. Geopolitical developments may
not only affect them in the country of origin

Volatility in financial markets (Equity/Gsec/
but also in other countries of their operation.
Corporate bonds/Alternate assets)
The balance sheet of the companies would
Geopolitical developments directly impact reflect the impact on its top line (revenues) and

The Institute Of Cost Accountants Of India

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