The Indian stock market has been rising since the outbreak of the novel coronavirus. Even when the country’s economy is struggling to recover, the stock market has gained more than 80%.
At a time where there is a coronavirus increase and everyone is more focused on staying safe. Corporate companies are also diverting their resources towards the manufacturing of oxygen for the country. Therefore, the rise in the stock market has taken many people by surprise.
The constant market rally has also puzzled many analysts. This is because many sectors continue to struggle under the economic pressures due to increases in coronavirus cases in the country. But this does not stop the stock market from rising more in India.
The vaccination for adults above the age of eighteen years has also helped the stock market. Since the majority of workers in the factories are above twenty, vaccination will ensure a better functioning system required to get work done. Hence, increased economic activities across the country. Here is more on the reasons the stock market is increasing in India amidst the pandemic.
Extended vaccination period
The extension of vaccination and implementation of partial lockdown has reduced anxiety and given the stock market leverage to grow. Investors and traders are now brimming with newfound optimism. The announcement by the government to initiate the first phase of mass vaccination further motivates market participants. Vaccination for citizens above the age of 18years has also proven additional security for industries.
This will allow them to continue to operate which will prevent market fall. Also, banks, which are considered economy representatives, did not face asset quality crises as expected. Without a doubt, this seems to be the biggest reason behind the rise in the stock market. Investors and traders believe the vaccination will also open doors for higher economic activities. this will help the country recover and get back on track.
Positive corporate earnings
The positive beginnings of the first-quarter corporate earnings season have increased the confidence of many investors. The first-quarter results of many notable and top-ranked companies have been splendid and have brought nothing but positivity. Many corporate companies have also started to post positive earnings in the second quarter.
This is proof there is a significant recovery in many sectors and has resulted in a rise in the valuation of the stock market. Many investors also feel the stock market is looking at a brighter scenario in a few months. If this continues, the stock market will continue to rise in the future.
Domestic institutional investors
The current stock market rally is being provided by domestic institutional investors (DIIs.) These include banks, mutual funds houses, insurance companies and many more. According to research, from April up to date, the domestic institutional investors have invested a net of Rs 9,669 crore.
This is against a net outflow of Rs 11,101 crore made by foreign portfolio investments. While foreign portfolio investments were exercising caution because of the rise of coronavirus cases around the world especially in India.
Market participants explained that domestic investments have been going strong. They also believe the impact of coronavirus on the economy will soon be over. The stock market data also indicated that the domestic institutional investors have overtaken the foreign portfolio investment in net investment in Indian equities. This is happening for the first time in seven months.
The economy of India is gradually recovering from its economic shock due to the coronavirus pandemic. The country’s economy experienced a 30% Gross Domestic Products contraction in the first quarter of 2020. It also experienced a contraction of 7.5 % Gross Domestic Products which is in the better second quarter.
The growth of the economy has shown it will not experience any double-digit annual contraction. The country’s economy is said to recover to its initial position between 2021-2022. This development has further instilled confidence among traders and investors in the country. They now believe the country’s economy will recover faster than usual.
Foreign portfolio investment
The contribution of foreign portfolio investment to Indian shares has also increased the value of the country’s stock market. According to reports, India equity has received more than thirty billion dollars from foreign portfolio investments. This is said to be the highest foreign portfolio investments inflow across emerging markets.
Many international investors believe India’s economy will recover, this is why they are investing in the country’s stock market. Besides, stock market analysts say the weakness in the dollar index has contributed to an increase in foreign portfolio investments inflows. The Indian currency has also been forecast to rise by 1.3% in 2021 which indicates the growth of the economy
The bottom line
With many businesses and organisations recovering and growing stronger, stock trading is the best way to invest and make ends meet.