Why India’s Stock Market is Roaring
India has been witnessing an unprecedented bull run in the stock markets with the BSE Sensex and Nifty’s crossing new highs every day. In the last three years alone, the Sensex has surged by 33% and the NSE has registered a 46% rise. As a result, major investors are encouraging a steady interest in the Indian stock market leading to it becoming one of Asia’s fastest growing markets. This article will discuss the various factors that have been driving the positive sentiment in the Indian stock market and why investors have been so bullish about it.
India’s Stock Market
India has the 11th largest stock market in the world with a market capitalization of over $1.97 trillion, as of June 2020. It comprises of two main exchanges, the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Both of these exchanges offer a wide variety of securities including equities, equity linked savings schemes, debentures, derivatives, mutual funds, government bonds and other financial instruments for trade.
The last few years have seen an intense bull market with record breaking performances by the Sensex crossing 50,000 points for the first time in 2021. It was in 2013 that the Sensex had first crossed the then all-time high of 21,000 points and has been climbing higher and higher with each passing day.
Reasons for India’s Stock Market Boom
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Corporate Reforms: The bullish sentiment in India can be attributed to the major corporate reforms that have taken place over the past few years. A new Companies Act has been passed, which simplifies the process of incorporating and running a business, allowing companies to focus more on their core competencies. Furthermore, the Goods and Services Tax (GST) has been implemented, which will not only reduce the associated costs of managing taxes and accounts, but also drastically reduce the average product prices.
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FDI Relaxations: Further liberalization of the banking and finance sector in India has allowed more Foreign Direct Investments (FDI) into the country. This has given Indian companies access to large amounts of capital, which in turn has helped them expand operations and invest in new technologies and products.
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Monetary Stimulus: The Indian central bank – RBI has maintained a low interest rate policy for the last five years, which has been instrumental in encouraging investment schemes, thus creating a huge pool of investors.
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Budget Proposals: The Government of India has proposed a wide array of budget revisions in 2021, which has had a direct impact on the stock market. This includes reforms related to taxation, credits, and incentives that are being proposed on a yearly basis, driving caps on returns and enabling greater transparency for investors.
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Political Stability: One of the major factors in India’s stock market success has been political stability. The Narendra Modi-led NDA government was re-elected in the 2019 general election, giving it a 5-year tenure and boosting the sense of confidence among investors.
From corporate reforms to FDI relaxations and from budget proposals to political stability, India’s stock market has certainly seen a massive upsurge over the last few years. These factors have been instrumental in fuelling the bullish sentiment among investors in India’s stock market, which is expected to continue in the near future. Moreover, with the country now transitioning to a $5 trillion economy, investors have even more reasons to remain positive about the Indian economy and its stock market.
