Hello friends, today we will discuss what is the reasone behind the bull run in Indian stock market. The Indian Stock Market, or you can take any industry like NIFTY50 or SENSEX, it is running at its highest level. What is the reason for this bull run, the most important thing that is linked with RBI. I will try to tell by linking it with the policies of the central bank, as well as what are its cunserns.
Those traders who do trading on day to day basis are still waiting to a large extent that this record breaking stock rally is going on increasing in kind. This may increase even further in the coming time, because the expectation is that the RBI will adopt DOVISH Monetary Policy.
For now, if you look at the top 50 companies inside the National Stock Exchange, the index of that is called NIFTY. He has doubled as compared to his last year, which was very low in March 2020. And he is one of the best performers in the world, you can say, and is achieving a new peak here every month.
And now if you talk about this month, it has been the top gainer of Asia, and you can also see in the chart that the value of NIFTY50 is around 15,856.05 at the moment and which is the highest so far so that is it. 15,962 means it is running at its highest level. Not only this, you will also be able to see SENSEX that 52,975 is just closed on last Friday.
Now here comes the question that why is this bull run? If you look at the condition of the economy, then no one is looking very good. The infact has weakened a bit now, you must have seen that, it was expected that the financial year of 2021-22 is. In this, we can expect a growth of about 12%, because the way it went down, the base can be beneficial.
But because of the second covid wave, due to many reasons, all the rating agencies who have reduced their estimates, should take RBI or any other agency, they have changed their previous ratings.
So, why is this bull run being seen in the stock market despite that? Because directly it should be such that as the economy is performing, then the stock market should also increase.
Here you will see the difference between the statement of central banks of most other countries and the statement of RBI. And who is the central bank of the rest of the emerging markets of the world, they have either indicated that the interest rate will be increased, they will hike in the coming time.
When we talk about pay interest rate here, it is simple here that if you take a loan from any other bank, then how much is the interest. All this will come into it as repo rate done, reverse repo rate done. So if you see this, most of the central banks of the world, they have told here that we can hike in the coming time.
Why is this done, so whenever there is a fear of inflation, it is done.
Because the inflation which has been hiked now, if the inflation is to be kept under control then there should not be too much liquidity, he should try to do a little work.
So here most of the Central Bank is pointing towards him, but the Reserve Bank of India has kept his staance as Dovish.
It means to say that you just imagine that, if the interest rate is there, then obviously you will borrow more loan, invest more in business, then it is obvious that these people think that this will increase the economy. But those who are hawkish think more that the interest rate should be high because inflation should be controlled.
If inflation is not controlled, it can cause more damage. Inflation should not be too high, and that is why you must have seen that RBI has also been given the responsibility, that is, our inflation should be between 2% to 6% and 4% should be the average.
But the Reserve Bank of India has not taken any such stance like the rest of the Central Bank, the hawkish one still maintains dovish. It means to say that even if you still see, the liquidity that is being put inside the market. And RBI is saying that this is a price gain, the inflation which is being seen a little now is transitory. RBI is not paying much attention to it.
In a dovish policy, inflation is not considered a big threat, and that is why all these things are being adopted by RBI. Because of this, the investors who are inside India and the ones outside are paying attention to this thing. And because of this, you must have seen that till now this year the highest inflow has come, about $ 7 billion has already been reached, which is the highest in the emerging market of Asia.
Then it is obvious that people will invest more, if you get money at very cheap interest rate, then it has liquidity to a great extent, it will also go to Indian Stock Market. Coming to the Indian Stock Market means that shares are being bought, so when there is more demand then your market goes up. So the policy that RBI has adopted is a very big reason because of which Indian Stock Market is running on bull run.
What is Dovish?
If we understood Dovish, then it would be two, one would be Dovish, and the other would be Howkish. Dovish means that these people who indicate here, that the interest rate should remain low here. And the liquidity in the market remained constant. Meaning that inflation is not considered very consern, so the strategy that follows is called Dovish.
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