A view of the Bombay Stock Exchange (BSE) in Dalal Street, Mumbai.(Photo | ANI)
Updated on
:
The Indian equity markets have reversed the broad downward trend it had been witnessing for a few months and staged a relief rally in recent days. The benchmark indices—Nifty and Sensex—have been posting gains ever since they opened for trading after the long Holi weekend and have risen by over 5 percent since then. On Monday, both indices jumped more than 1.3 percent, beginning the week on a positive note. The major driver for the markets is the return of foreign portfolio investors, who have been net buyers of Indian equities in the past few sessions. Foreign institutional investors were net buyers to the tune of ₹7,500 crore on Friday and ₹5,300 crore on Monday. The buying has been largely helped by the correction in valuations, which are now closer to their long-term averages—at least on some large-cap counters. The expectation of another rate cut at the April monetary policy committee meeting has also resulted in a rally in rate-sensitive stocks.
However, these temporary bullish sentiments in the equity markets should not be taken as signs of a full-fledged economic revival. The country continues to labour under some severe economic pains, and the latest upward trend in stocks is not a reflection of that reality. Besides, the external risks—especially the threat of reciprocal tariff from the Trump administration—are far from over, even if intense behind-doors discussions between the two countries are on to avert their imposition. The sustainability of the current rally would also depend on the fourth quarter results of companies. GDP growth estimates, at 6.3-6.5 percent over the next two years, show that the economy may continue to face some fundamental problems such as moderating consumption and slow pick-up in private investment. An ICRA study showed that the share of private capital expenditure in India’s gross fixed capital formation declined to a decadal low of 33 percent in 2023-24. The current financial year has not seen much improvement either. Consumption growth remains muted and limited to the top 10 percent of the population. The latest run in the equity markets should not, therefore, dazzle anyone into believing things have really turned around.
