Stock Value and Inflation

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Avinasheswar

Avinasheswar (Querist)
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20 April 2008 How does inflation effect stock market?

R.V.RAO

R.V.RAO (Expert)
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21 April 2008 INFLATION IS AN ALL PERVADING MENACE WHICH AFFECTS ALL FACETS OF OUR CIVIL LIVES, COMMERCIAL WORLD INCLUDING STOCK MARKETS.
ONE KNOWS FOR SURE THAT HIGH PRICES AND INFLATION CHASE EACH OTHER.THIS AFFECTS THE PURCHASING POWER OF PEOPLE WHICH INTURN AFFECTS THE GOODS AND SERVICES PRODUCED IN ANY ECONOMY.THE GOODS AND SERV. PRODUCED BY DIFFERENT COMPANIES GET AFFECTED IN TERMS OF DEMANFD FOR THEM AND THE COMPANIES'PROFITABILITY IS AFFECTED .IT IS THIS ASPECT WHICH INFLUENCES STOCK PRICES.
ALSO THERE IS THE FEAR THAT RBI CHECKS INFLATION BY HIKING CRR OR BANK RATE OR USES OTHER WAEPONS OF MONETARY CONTROL.
INFACT RBI HIKED CRR AND BANK STOCKS DIPPED several times due to this action of RBI.WE WERE ALL WITNESS TO THIS MANY TIMES IN STOCK MARKET HISTORY.
R.V.RAO

Avinasheswar

Avinasheswar (Querist)
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28 April 2008 Will not inflation have opposing impact (negative and positive) on two different stocks? Will it happen like this?When there is a rise in price, the producers of goods and services profit from it and the buyers of those goods and services lose their profits. In that case the stock value of the producer companies rise while the value of shares of buyers companies go down. Is my analysis right or wrong?