Indian Stock Market to a new high : What you need to know

Picture courtesy: wolfofdalalstreet

The stock market in India is scaling new heights yet the festival season has to begin. The size of GDP, which has shrunk by 9% relative to the pre-Covid level, the stock market climbed 38%.

Due to Covid, the Sensex and Nifty had fallen to a low of 25,981 and 7,610 respectively on 23 March 2020, then the trend of bullishness in the market has not stopped. Both the indices are touching new highs from 23 March 2020 till now. Sensex has increased up to 122.7% and Nifty to 126.5% and today Sensex crossed 58,000, a high record level.

Such a bullish has not been seen in any market in the world. In India, in the last one and a half years, the shares of small and medium companies have outperformed the big companies. Bombay Stock Exchange small-cap index increased 206.5%, the midcap index increased 150.1% whereas an increase in the large-cap index is 126.6%.

But what is the reason for this boom? One reason is that 14.2 million new investors joined during the lockdown. They started investing money in the stock market. 4.4 million new Demat accounts were opened in the first two months of the current financial year.

Their share in the total turnover of the stock exchange is now 45% whereas earlier it was 39%.

FDI equity inflow grew by 168% in the first three months of 2021-22. Foreign Direct Investment into the country rose by more than two-fold to $17.57 billion during April-June this fiscal on account of measures such as policy reforms and ease of doing business.

Market sentiments were broadly supported by Federal Reserve Chair Jerome Powell's signal that the US Central bank would remain patient in winding down its stimulus. He affirmed US economic recovery and gave a detailed account of why he regards a spike in inflation as temporary and offered no signal on when the central bank plans to cut its asset purchases beyond saying it could be this year.

After the second wave when some stability came into the economy, the stock market is going up in every sector. Whether it is the IT sector, Real Estate, Pharma sector, Metal, chemical, banking or auto sector. Some policies of China on metal export also brought rally in the metal sector.

After a high listing of Zomato shares, investors were very inclined towards IPOs but for some time not all IPOs have been able to do so well. Investors will have to take a thoughtful decision. It is yet to watch whether this boom continues in the Indian stock market.