The pandemic hit the stock market. The economy has only just started to recover and get off its knees again while the stock market is busy touching the sky. While we have had our share of discussions that the stock markets and the economy are two decoupled worlds, the role that the stock market finds itself in is amazing. Well what we have learned from previous experiences is that you can never be too careful. So let’s analyze how long this bull rally will last? Do retail investors have something for them? Well, read along to find out.
While the stock market and economy move in two opposite directions, this is not a very unusual phenomenon, but the record high is fascinating. Earlier this week, after jumping 873 points the next day, the Sensex experienced a strong opening of up to 523 points if greater than 54,000.
These are numbers from the beginning of the week as the numbers are expected to rise higher as the week progresses. So now, did you think Sensex is the only one that gets numbers? The NSE Nifty followed the jump pretty closely because after one 246 points raise to cross the 16,000 level benchmark, pulled in an additional 134 points earlier today during intraday trading.
But what is the reason for this buoyant investor sentiment?
As much as we are aware of how the market reacts to every little detail like oil to fire, the reason for this boom is rather harmless. Well, this upswing in investor sentiment is the result of the rebound presented by the latest economic data. This is reflected in the improved manufacturing index and an improved gross value added in the construction sector.
I think it looks like the economy has more than one parachute this time around to ensure a safer landing. So does tax revenue on goods and services and better corporate profits. So the recovery from revitalized mobility seems to be bringing an open-mindedness to the stock market, and we’re all part of it.
Is that why the benchmark indices of the stock markets rise?
Oh well. The rise in these benchmark indices is particularly related to the economic indicators that show a recovery trend. This trend is not common, as the numbers achieved in this chain are higher than in three months. For example, one of the main contributors to the impact of economic mobility was the increase in Purchasing managers index on the 50.0 benchmarks, an achievement the stock market has longed for.
As mentioned earlier, there are many other sectors in need of work and although sector growth numbers do not directly correlate with workers’ wellbeing. However, these are still signs of a better point we’re at right now, and that’s the good news investors need right now to be lively in their emotions.
As a result, these benchmark indices secure sky-high numbers. This is an indication of the recovery from the effects of the second wave, and experts say it can be quite powerful. Well, here it should be noted that you would read this information on the day the Reserve Bank of India would submit its monetary policy review. This would continue to dictate the course of monetary policy action, but the central bank is expected to continue on its path of preferring growth to inflation, in coordination with the world’s accommodating monetary and fiscal announcements.
So, in case you’re wondering, the Sensex, which opened at 54,000, hasn’t looked back since.
Can we expect the bull rally to continue?
Well the main reason for this question is that the markets are trading at an all time high. So do we expect them to go even higher? Or have we reached the sky limit? If the experts are to be believed, the bull rally will continue on its way up. It is assumed that the momentum would be maintained. This is mainly due to the fact that banks and non-bank financial firms have had a normal collection cycle lately, which indicates greater confidence in stock market players.
However, in the financial report recently released by the Reserve Bank of India, the bank revealed that while the number of distressed assets has not increased as predicted, an increase in the number could be seen once the expansionary monetary policy is lifted. Nonetheless, there is currently optimism in the market and the improved collections of banks have comforted that feeling.
Even if economists are currently unsure about the recovery path, as can be seen from the distracting and contradicting forecasts of the economic downturn, the driving wheel currently seems to be in the hands of the stock market.
As for the consumer demand sector, this remains a sensitive issue. While some sectors show improvement compared to the second wave, some showed no signs of recovery despite numerous attempts to stimulate the market. However, corporate earnings should continue to recover if economic mobility persists.
Therefore, a successful vaccination campaign is currently a very important building block for the economic upswing, because it would ensure that mobility is maintained.
Private investors, where do you think this is going?
First, let’s give the loan where it is due. After all, thanks to their share allocation, these private investors have passed the 54,000 mark. This benchmark cross is particularly noteworthy after foreign investors sold stock markets worth INR 10,000 billion last month. And also included. With the current rally providing ample opportunities for investors to get into the market, several areas of the economy will offer value going forward.
So what does that mean? Will the private investors take over the FPIs? Well, it definitely looks like it. Because although the “representatives of smart money” had consistently sold last month, they were pushed back by the dynamism of private investors. The short position arose from the expectation of a correction in the overvalued stock market. Well, from the first week of August they had to buy back for fear of losing the bubbling market momentum. Well, if the market decides to continue its momentum, large caps are likely to outperform, and it doesn’t look like too far-fetched a story.
So the real question that should be asked here would be: where are you going, private investor? With these retail investors and mutual funds driving the market trend straight up, the valuations, experts claim, should receive the slightest attention.
Is it time for retail investors to be cautious?
There’s no denying that this bull party is pretty vulnerable as market valuations are already strikingly high. Hence, any disruption on the economic or political front can cause immense damage to players. As mentioned earlier, the bladder is delicate and it is recommended by experts to be as careful as possible. And if experience in the market has told us anything, it is that you can never be too careful in the market. Investing money at a high valuation can lead to root causes, so it is recommended for private investors to buy stocks during the correction phase.
Edited by Aishwarya Ingle