Mumbai29 minutes ago
Indian stock market is trading at record level. Sensex reached 52,300 and Nifty crossed 15,700. At the same time, the economic pace of the country has slowed down due to the lockdown after the second wave of Corona. This is the effect of the epidemic itself, which brought the country’s economic growth ie GDP rate down to a four-decade low.
Now the question is, why is the market booming despite the economic growth being weak?
We spoke to 3 experts. Experts believe that the current rally in the market is due to the economic recovery in the future. Restrictions will be relaxed as vaccination increases. As we have been seeing since last one week. However, during the second wave, there was no strictness like the previous lockdown. This time some concessions were also given in industrial work.
The result of the signs of improvement on the economic front is that the Sensex, the main index of the stock market, has climbed 9.6% and Nifty 12.7% till June 8 in 2021. Midcap stocks gave the highest return of 27% during this period. The market has doubled in a year, as the number of domestic investors as well as foreign investments has increased in the country.
How will the stock market get support due to the improvement in the economy going forward. First let’s understand this, for which we also talked to 3 experts…
Know the reason for the record rally in the stock market
According to depositories data, foreign institutional investors (FIIs) invested Rs 2.75 lakh crore in the financial year 2020-21, which is the highest in two decades. At the same time, brokerage companies have opened an average of 13 lakh new demat accounts every month from April last year to May 31, 2021, in the entire financial year. There were a total of 69 million demat accounts in the country as of May 31.
With this, the market cap of BSE has reached close to Rs 230 lakh crore, which is more than the GDP of the country. According to market expert Ajay Bagga, GDP is a picture and market cap reflects the flow, which is based on future prospects. Similarly, Avinash Gorakshakar also believes that a higher market cap means that somewhere the stock market is also seeing positive growth in the coming days.
ICRA Rating Economist Aditi Nair says that the agri sector is expected to grow better than expected due to a good monsoon. There will be good sowing of Kharif crop in 2021. The same sector had supported in the last financial year as well. He said that the overall economy growth would be particularly dependent on the condition of vaccinations and restrictions at the end of the year.