Like a boat trying hard to sail through a stormy sea, the Indian stock market sailed through some extreme highs and lows in 2020. Like starting off the sail on a calm sea, the Indian stock market also started this year on a stable note. However, the storm hit in March 2020 when the high-tide of the pandemic engulfed global economies and the stock market also experienced a significant dip. After experiencing many waves of tiny highs and lows, the Indian market spiked again, this time reaching an all-time high of 50,000 points.
And now, it seems like the sun came through to shine again as at the beginning of the month, the Indian Stock Market became the 7th largest stock market in the world!
In February 2021, India’s stock market reached $2.7 trillion, thus coming up by 3 places to become the 7th largest stock market in the world in terms of market capitalization. The Indian market has now surpassed Canada, Germany and Saudi Arabia.
When it comes to performance, India’s stock market is at 2nd place among the top 15 best-performing countries in 2021 so far. This makes for a remarkable achievement for the Indian economy after it technically entered recession in the second quarter of 2020.
Economic Times reported that India may soon overtake France to become the sixth biggest stock market in the world. The total market capitalisation of France now stands at $2.86 trillion.
But, how did India’s market cap increase to this level despite going through such a turbulent year?
How did it happen?
It’s almost hard to believe that when the entire world was struggling with the pandemic, the Indian stock market had been rising constantly ever since the lockdown came into force.
With experts from all important sectors involved actively in the market, almost 95% of the time, the market functions more smartly than we do. You might recall that the market was falling drastically in February and March and stooped down to as low as 27,000 points. This is when these market experts realized that the pandemic-induced lockdown is going to stay for long and that the market was about to go down for the worse.
Hence, they started taking out their money from the markets. It was due to this, that the market then started correcting itself.
Once again, towards April, when people like us started to understand the seriousness of the pandemic, the market, being one-step ahead, already knew that with low fatality rates, increased public immunity and extensive search for the vaccine, the pandemic situation would get better within the next 6-8 months. So around June, they started buying again.
This entire scenario is the perfect example of how the market is always looking ahead and functioning accordingly.
The fall and rise of the market also depend on the availability of alternate investment options. During the pandemic, investment options like fixed deposits, real estate and bonds could not be considered as good investment options due to their low-interest rates, low returns and fear of loss. Hence, all this extra money got diverted to the stock market and gold.
Additionally, the lockdown led to the creation of work from home culture, online education system, and also led to increased job losses and pay cuts. All of this, thus encouraged a lot of new investors into the market who were looking for ways to earn additional income.
All these reasons became the ultimate contributors to the rapid increase in the market capitalisation of the Indian stock market.
Can Indian Stock Market make it to the Top?
All in all, looking at the current scenario, it seems like the Indian stock market has more sunny days on its way. The latest IMF projections have suggested that India’s growth will rebound sharply to 11.5% in FY22 and 6.8% in FY23.
Ever since the sharp market dip of March 2020, the Indian stock market has been on a bear run. With new IPOs lined up for this year and big government entities like LIC making their way into the market, there is a positive sentiment among investors.
So what do you think, can the Indian stock market continue its positive run and make it to the top 3?