When on 6th January, when an armed and angry mob of Trump’s supporters stormed Capitol Hill and clashed with police, there was something good happening with stock markets in the world and in India. I know most of you be like how’s that is even possible because Politics have minimum to do with commerce, markets are more about trade and money but US Political events turn out good for Market’s around the globe, Dow Jones rose 1.44% on Wednesday, the FTSE 10 in UK and DAX in Germany too rose 3.5% and 1.7% respectively. Asian markets rose on Thursday with the Nikkei 225 in Japan and STI Index in Singapore closing with gains of 1.6% and 1.65% respectively.
In India, although the Sensex opened strong on Thursday in line with the global trend, it closed with a decline of 0.17%. It is important to note that the economic stimulus in the US and the inflow of funds into Indian equities has been one of the dominant factors for the rise of equity markets. So, a majority for Biden on the Senate floor and his ability to push a stimulus will have a positive impact on Indian markets as a part of that money is expected to find its way into Indian equities too. Foreign portfolio investors’ net investment of Rs 2.22 lakh crore in Indian equities since April 1, 2020, resulted in Sensex and Nifty gaining 63.4% and 64.4%.
Indian markets are already breaking their own records, Markets work on anticipation of the current and future economic outlook. The Covid impact on the economy was predicted in March, and hence the markets corrected the Sensex has gained over 15% in calendar year 2020. Now, the pace of vaccination will have a bearing on the markets. The RBI has projected the CPI (consumer price index) inflation at 6.8% for the third quarter of 2020-21, 5.8% for Q4 of 2020-21, and 5.2% to 4.6% in the first half of 2021-22. Real GDP is expected to contract by 7.5% in 2020-21 and expand by 0.1% in Q3 of 2020-21 and 0.7% in Q4 of 2020-21. GDP is expected to expand by 21.9% to 6.5% in the first half of 2021-22. Going by these numbers, long-term prospects seem bright.
Concerns
Foreign investors have been the big bulls in the market so far. If the liquidity dries up and the economy doesn’t show the expected resilience, the FPI flow will also come down and the markets will stagnate or slowly decline from the current high levels.
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