The Indian stock market is hovering near an all-time high, while foreign capital is still flowing in frenzied, driving Mad Bull to continue.
Currently, the Mumbai SENSEX Index is around 53,000 points, with a cumulative increase of more than 75% since the low in March 2020. The Nifty 50 Index, which represents India's 50 largest listed companies, has more than doubled during the same period. It is one of the best performing indices in the world. This month, it was the stock index with the biggest increase in Asia.
According to Bloomberg data, so far this year, the Indian stock market has received a net inflow of about 7 billion US dollars in foreign capital, ranking first among emerging markets in Asia, driving the stock index to continuously test new peaks. At a time when concerns about inflation are deepening, the market expects the Bank of India to continue to implement an easy monetary policy in the coming months, which will support the stock market.
On the one hand, since May last year, the Bank of India has kept interest rates at historic lows and injected unprecedented liquidity into the banking system. On the other hand, rising food and energy prices have weakened returns from traditional investment channels such as bank deposits, and encouraged more capital to flow into the stock market. According to data from the Indian Market Supervisory Authority, the Indian market added 14 million new electronic accounts in the first quarter of this year, driving up the stock market.
Chakri Lokapriya, Managing Director of TCG Asset Management in Mumbai said:
The Bank of India's decision to keep interest rates low will help enterprises reduce debt and loan repayment costs, and enable stocks to obtain higher price-earnings ratios.
Rising inflation may force the Bank of India to tighten policy, but investors think this is unlikely, at least in recent months. Despite the easing of the epidemic in India, economic growth has always been viewed as a top priority by the central bank.
Despite this, India's Securities and Exchange Commission Chairman Ajay Tyagi warned on Thursday that any reversal of easing policies would affect the Indian stock market. On this point, the South Korean, Russian, and Brazilian stock markets all learned from the past: the Bank of Korea hinted at policy normalization this month, and the stock market fell by more than 1% in July; as Russia and Brazil began to raise interest rates, the stock market also declined.
Société Générale economist Kunal Kundu said that as inflation soars, companies may have to raise prices to offset soaring costs. “In view of this, the Bank of India may have to return monetary policy to a normalized track ahead of time.”