The stock market is said to be the barometer for the economic growth and prosperity of the country and the same hold good for India. The BSE benchmark and the NSE Nifty have made record-breaking rallies showcasing the bullish sentiments in the Indian equity markets. The BSE Sensex on Thursday crossed the 32,000 mark for the first time as it opened at 31,896, up by 91.41 points in early trade. The Nifty too gained 39.70 points and opened at 9,855.80.
The Nifty too has been trading well above the 9800-mark and looks to go past the milestone 10000-mark in coming trading session. The stock markets have exceeded the expectations of financial pundits making a tectonic surge of well over 4000 points from 27,626 (July 11, 2016) to 31,896 (Opening Levels - July 13, 2017). The boost provided to the stock markets post the GST rollout on June 30 midnight is off a greater magnitude with the Sensex leapfrogging 800 points from 30, 921 (July 1) to 31,896 (July 13, 2017).
Narendra Modi Govt's path-breaking economic reforms have surely brought in more transparency in the stock markets operations. Although the demonetization drive triggered a temporary correction in the levels of the soaring market between November and January, it has brought in a greater degree of transparency and liquidity into the equity market operations for the long term. The ever-soaring market levels in the subsequent financial quarters are a strong testimony to the same
The landmark indirect tax reform Goods and Services tax which got formally launched on June 30 midnight has triggered long-lasting positive sentiments in both the domestic traders and overseas investor sentiments. The markets have become more buoyant and enhanced liquidity has resulted in sustainable trading volumes.
The RBI's monetary policy to keep interest rates (repo and reserve repo rate) intact augured well for the economy with respect to curb the growing inflation rate.
So here are the major driving forces behind the equity markets resounding rally and peaking at new heights.
1. India's foreign exchange reserve touch soaring heights
India’s foreign exchange reserve touched a new record-high of $386.539 billion after it rose by $4.007 billion in the week to June 30, due to an increase in foreign currency assets (FCAs), the RBI said on Friday. In the previous week, the reserves had surged by $576.4 million to reach $382.53 billion.
2. Sustained inflows from FIIs
Foreign institutional investors (FIIs) continued to make lucrative investments in the domestic financial markets during the first half of 2017. They pumped in nearly $23 billion (over Rs 1,40,000 crore) into the domestic markets in January-June 2017 on several factors, including expectations of accelerated pace of reforms. FPIs had invested about $1.2 billion (Rs 7,600 crore) during the corresponding period last year.
3. Strong cues from Global Markets amid positive macroeconomic US data
Most other Asian markets have witnessed bullish rallies after the US posted better-than-expected jobs report for June. US total nonfarm payroll employment increased by 2.22 lakh in June, well above market consensus of 1.70 lakh, the Labor Department announced on Friday. The unemployment rate was little changed at 4.4 percent in June.
4. Forecast of robust monsoon
The met department had predicted a healthy monsoon which shall have a positive bearing on the agricultural produce and in turn effect the agro based commodities in the derivatives market. During the week starting July 14, rainfall is very likely to increase over most parts of the country, and monsoon performance is likely to improve thereafter, according to reports. Last week, monsoon covered most parts of the country. Rainfall since June 1 has on average been 4 percent above normal.