The Sensex hit an all-time record high of 32,634 on Monday while Nifty rose to achieve another record of Rs 10,231. Fund managers expect Nifty to rise to 10,400 while still others expect it to hit 12,000. Globally, stock markets are buoyant with three major indices hitting intra-day and closing record highs. Most global markets including USA, Japan, South Korea and Brazil have seen sharp gains in recent times. Many have wondered whether there is any justification for this boom.
Here are the key reasons why stock markets are buoyant:
#India’s Industrial Production stages recovery: India’s industrial production has witnessed a 9-month high of 4.3% in August with manufacturing production rising by 3.1% as against a contraction of 0.2% in July. Mining output rose 9.4% as against 4.5% in July. This has warded off the fears of demonetization and Goods and Services Tax (GST) continuing to have negative impact on industry.
#Indian Economy On Solid Track: Despite pessimism about slowdown in Indian economy, there is a feeling that it has bottomed out and is on strong growth track. The International Monetary Fund (IMF) Chief Christine Lagarde has sounded positive about India’s prospects in the medium term although the agency has lowered the growth forecast to 6.7%,0.5% lower than its previous forecasts.t
#Global stocks also in boom phase :Worldwide stock indices Dow Jones Industrial Average, S&P 500 and Nasdaq Composite rose 17% year-to-date as economic conditions are seen improving and supported by hopes of tax relief. Expectations of better corporate earnings improved as JP Morgan Chase, Citigroup and Bank of America released results while financials of Verizon and Honeywell are awaited. US President Donald Trump said since November 8, 2016, the stock market has moved up 25% and unemployment at 17 year low on the back of business enthusiasm. According to Morgan Stanley, economic recovery seems to have taken hold in September quarter and economic growth is expected to stay positive.
#Stock markets are about future growth: Even as pessimism from IMF and some agencies regarding global recovery as inflation levels remain below target, stock market investors are more concerned with what lies one year ahead than temporary fluctuations or crises in economic growth in the past.
#Rise in India’s Exports: The industrial output is not the only reason for optimism among investors. India’s exports rose 26% in September, the highest in six months. This was partially helped by lower crude oil prices that in turn caused better realization on petroleum products exports. Engineering goods witnessed 44 % growth and out of the 30 sectors only four sectors witnessed contraction in exports- dairy products, fruits and vegetables, iron ore and handicrafts.
#Primary Markets also performing well: In 2017 till date, 28 companies have gone for initial public offerings (IPO) mopping up Rs 44,853 cr surpassing the previous high attained seven years ago. This shows the need for companies to raise funds for expansion and how the bull run in the secondary market is helping companies achieve their target.