Thursday, 7 April 2016

Indian stock market: A Coincidental Indicator of Economy

Indian economy seems poised after union budget 2016-17 in the positives of domestic economy and negatives of global economy. Indian stock market has evolved as a main indicator of economy. Not very far in past, on swearing of Narendra Modi as 15th Prime Minister of India, there was a stoppable rally in stock market viz BSE Sensex and NSE Nifty.  The Sensex was hovering around 24,000 on May 2014. From then the stock market was fueled with external funds from FIIs and DIIs.

The key events reflected strongly by Indian stock market during 2014-15 were:

  •          Strong support for the promises of reform and growth (GST, Land bill)
  •        PM announcement of Jhan Dhan Yojana on Independence day of 2015
  •      Strong support seen for PM call for FDIs from foreigner and specially NRIs
  •      Make India campaign, with special reference interests from Chinese investors 
  •      India’s GDP growth rate surpassing the china’s. 
  •      Weakening manufacturing in china and Europe
  •      Lowering of Indian economy outlook by International and national rating agencies
  •      Disagreement between BJP and allied political parties
  •      Degrading of social and religious harmony
  •      Enfeebled Indian banking systems and weakening rupee

The Indian stock market discounted each and every happening of domestic as well as global economy with corresponding fall and rise in SENSEX and Nifty. The Indian robust GDP growth rate collision with uncertain international business environment was reflected by the sense of fatigue, cautiousness and fear among investors.

Whether the stock market rises or falls, it is the indicator of Indian as well as foreign outlook towards continuance of India’s growth path. The volatility of stock market does communicate about the risk in economy and business, but is also the main purpose of the stock market to be able to reflect the investors’ sentiments.  With more people in financial system, more education about economy, investment and finance, it is evident to experience more volatile Indian stock market in coming times. 

Dr. Ajay Kumar Patel
Assistant Professor
Deptt. of Management Studies

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