The Great Indian Bull Run

In today’s FinStop, we take a moment to understand what’s behind the massive bull run in the Indian Stock Market.

Gone are those days when the typical Indian Dads used to say, “Beta Stock Market Ek Juha hai.” There has been a storm in the Indian Markets since the beginning of this year. It has been nine months, and the market indices, i.e., Nifty and Sensex, are climbing to new highs showing no signs of slowing down. But why is this storm brewing up? Let’s find out!!

Before commencing, we need to look at the graphs and the spectacular rise in both indices.

Sensex closed at 59,413 points on 29th September.

Just see where we were exactly a year back and where we have come. The rise is phenomenal and certainly needs proper reasoning. There has been a similar rise in Nifty as well. To understand this correctly, we need to travel back to March 2020. I am sure we won’t forget this date anytime soon, for obvious reasons.

With the advent of nationwide lockdown in March 2020, the Indian economy was forced to shut down, and people were asked to work remotely. Just after the announcement of lockdown, there was a strong selling in the market, which led to indices falling to new lows. However, as lockdown became a lifestyle and economic activities slowly revived, people started investing because they had ample money in their bank accounts. How you ask?

People started working remotely, and salaries began to get credited to their accounts. However, the lifestyle of the people, in general, has remained low-key because of Covid restrictions existing at numerous places. Mall, theatres, restaurants were closed, and people just could not spend as they did in the pre-covid world. More savings meant investing.

Now, things will start falling into place. The following are the observations that Indian Markets have had seen since March 2021-

1. Fixed Deposits (FD) were considered as a safe investment in pre covid days. However, with the advent of covid, the interest rates on fixed deposits have been around 3.5%-4% (After-tax), which is lower than the current inflation rate of 6%. This implies that the money kept in the banks is shrinking in terms of value. People understood this and hence started investing in equities which gave higher returns.
2. Then there has been a subtle rise in the demand for goods and hence the rise in prices for many goods and services. This is because of the fact that RBI has pumped liquid money (simply the free-floating money) into the economy while India was in the lethal 2nd Wave. While RBI took this move to keep the economy robust, the liquid cash is finding its way to the Stock Markets.
3. Then there is this story about Foreign Indirect Investors (FII). Overseas investors are taking notice, with net inflows amounting to about $7 billion so far this year, the highest among emerging markets in Asia.
4. And undoubtedly, the players in the stock market have risen to an unprecedented level as 14 million new Demat accounts were opened in the fiscal year through March 2021. Hence, financial literacy is paving the way in India.
5. RBI has kept interest rates on loans at a record low. Why you ask?

“The RBI’s decision to keep interest rates lower is helping companies reduce debt and loan-servicing costs,” said Chakri Lokapriya, managing director at Mumbai-based TCG Asset Management Co. Ltd. He added,

“Lower debt costs will allow stocks to command a higher multiple.

So yeah, all this suggests that the measures by the central bank to keep interest rates low and pump in cash to the economy have favored the equity markets to a large extent. Seeing the current circumstances, RBI is still prioritizing the economy’s growth even as the Covid-19 cases slow.

Sensex and Nifty in 2021 be like 👇

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Interesting Facts about the Indian Stock Market.

1. MRF is the highest valued share, with the price of one share hovering above 70,000!
2. According to a recent KPMG Survey, 82% of the CEOs are bullish on growth!
3. Sensex recently overtook the France Stock Index, for the first time to become the 6th largest in the world in terms of Market Capitalization. The Sensex index is valued at USD 3.6 Trillion.
4. The full-form of Sensex is Stock Market Sensitive Exchange, while Nifty stands for National Stock Exchange Fifty!
5. The Nifty 50 Index has more than doubled from a March 2020 low — one of the best performers in the world over the period and testing new peaks almost every month. It is also among Asia’s top gainers this month!!

Global News from all around the world

1. Aditya Birla AMC Mutual Fund is all set to go public! Bidding for its IPO has started.
2. Sensex and Nifty Slumped as the US Bond yields Rebounded.
3. Elon Musk trolls Jeff Bezos publicly by mockingly sending him the silver medal as Elon Musk overtakes Jeff Bezos crossing the net worth of USD 200 Billion!!
4. TataNeu will be the new super application to be developed by the TATAs.
5. Future Groups seeks nod for talking about the Reliance deal.

This is all for today’s FinStop. If you liked our content, don’t forget to share it with your friends.

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