On July 3, the Bombay Stock Exchange (BSE) index succeeded in touching the level of 80,000, while the National Stock Exchange (NSE) or Nifty also crossed the level of 24,000. The Sensex was at 10,000 level on 6 February 2006, whereas it reached 20,000 level on 29 October 2007, 30,000 level on 4 May 2015, 40,000 level on 23 May 2019, 50,000 level on 21 January 2021, 60,000 level on 24 September 2023, 70,000 level on 11 December 2023 and 80,000 level on 3 July 2024. Thus, the Sensex has increased by more than 50,000 during the tenure of the Modi government from 2014 to 3 July 2024.
The Sensex completed the journey from 70,000 to 80,000 in just 139 trading days, while it took only 57 days to cross the 5,000 level. Earlier on 24 September 2021, the Sensex had travelled from 55,000 to 60,000 in just 28 trading days. The reason for this rise was the significant increase in the shares of companies like FMCG, IT, banking, real estate etc. Due to the expectation of the government to remain stable and the economy to remain strong in the coming months & years, the Sensex may soon cross the level of 90,000 to 1,00,000.
Even though the Sensex has seen a tremendous jump, the valuation of the shares is still very low. The Sensex shares are not very expensive i.e. the PE ratio of the companies is low. When the Sensex reached the level of 50,000 in January 2021, the valuation (PE) ratio of its companies was trading at 34.4 times PE as compared to earnings per share. When the Sensex reached the level of 60,000 in September 2021, its PE was trading at 31.3 times, when it reached 70,000, its PE was trading at 24.8 times and when it reached the level of 80,000, the PE was trading at 24.3 times. Therefore, it is believed that the valuation of stocks will improve in the coming months and the Sensex will also continue to be bullish. However, the provisions of the Union Budget, the movement of monsoon, the level of inflation, the stance of the Reserve Bank of India regarding monetary policy etc. will determine the movement of the stock market.
The condition of the stock market continues to remain strong on the strength of domestic investors. In 2024, domestic investors have invested more than Rs 2.28 lakh crore in the stock market. Not only this, but domestic investors have also played an important role in taking the Sensex from 75,000 to 80,000 level. Companies like Reliance, Mahindra & Mahindra, ICICI Bank, Bharti Airtel, State Bank of India and HDFC Bank have also played an important role in taking the Sensex from 70,000 to 80,000 level. Talking about sectors, banking, BSE Power, BSE Realty, Auto, Telecom etc. have helped in maintaining the surge in stocks. Apart from Sensex, Nifty 50 also continues to be bullish. In the coming days & months, it can touch the level of 25,000 and by the end of this year it can close at the level of 26,000 to 27,000.
The new government has taken charge. Nirmala Sitharaman has again become the finance minister. Therefore, it is expected that the government will carry forward its old policy against the banking and economic sector, because the earlier policies of the government have helped in strengthening the Indian economy along with banking sector and accelerating the pace of development.
There is an atmosphere of enthusiasm among investors due to the continuous rise in the Sensex, which is a positive sign for the economy. At present, the selling phase is going on in the stock market of almost all the developed countries including USA. Due to the Corona pandemic, geopolitical crisis etc., the condition of the stock market in developed countries is not very splendid right now. There is also a slowdown in the global economy and there are chances of recession in some countries. However, there has been a slight softening in the level of inflation at the global level, because the supply chain at the international level has become a little better than before and the price of crude oil has also softened. In such an environment, foreign investors are being motivated to invest in the Indian stock market in the hope of getting better returns.
India is continuously moving ahead on the development front. The GDP growth rate in the fourth quarter of FY 2023-2024 was 7.8, while it was 6.1 percent in the same quarter last year. At the same time, the GDP growth rate in the financial year 2023-24 was 8.2 percent, which is 1.2 percent more than the estimate of the Reserve Bank of India. According to the Ministry of Statistics, the growth rate remained fast during the period under review due to strong performance in the manufacturing and mining sectors. The manufacturing sector has grown by 9.9 percent, which was minus 2.2 percent in the financial year 2022-23. Similarly, the mining sector grew at the rate of 7.1 percent during the financial year 2023-24, which was 1.9 percent in the financial year 2022-23.
The National Statistical Office released the retail inflation data on June 12, 2024, according to which retail inflation stood at 4.75 percent in May, which was a 12-month low. There was some reduction in retail inflation in the month of April, but it was slightly higher than the month of May at 4.83 percent. Retail inflation was 4.81 percent in June 2023, while it was 4.44 percent in July 2023. The central bank is very sensitive about inflation and wants to keep the economy strong by maintaining a balance between inflation and growth rate.
Despite the lending interest rate remaining at a high level for the last few months, loan disbursement is increasing, as the banking sector continues to remain strong, which is giving strength to development.
HSBC India’s PMI figure also stood at 57.5 points in May 2024, which was 58.8 points in April, while the composite PMI was 60.50 points in May 2024, which was 61.50 points in April 2024. These figures reveal about pace of economic activities. PMI or composite PMI being above 50 points means that economic activity in the country remains booming.
At present, India’s growth rate is continuously collective because inflation is a slight high, but still within the tolerance limit set by the Reserve Bank of India, loan disbursement is also cumulative, domestic and foreign investors are continuously investing in the country, foreign exchange reserves are snowballing, industrial production is growing, the price of crude oil is decreasing in the international market, the balance sheets of government and private companies are getting cleaned up and their profits are also improving, private investment and expenditure are also increasing, etc.
In such a condition, it is natural for the Sensex and Nifty to remain in a bullish trend. Such a circumstances is beneficial for the economy and conducive for development. A decrease in the price of shares not only causes loss to investors & companies, but it also has a negative impact on the country’s economy and FDI decreases due to selling of shares by foreign investors. In its absence, the country’s growth rate, employment, economic activities are also negatively affected. However, right now there is favourable surroundings for investment in the stock market, which all Indian and foreign investors should take advantage of.
Satish Singh, Ahmedabad based Senior Columnist. Views are Personal
