What's Fueling Stock Market Bull Run

Stable economic growth and strong corporate earnings add to sentiment.

-  RAJIV RANJAN SINGH

The pandemic-induced fear that gripped the world in March 2020 had a profound impact on the stock markets, pushing them into a state of excessive fear, which, in hindsight, laid the foundation for the subsequent bull run. Since then, Sensex has zoomed over 41,045 points from its March 2020 low of 25,639, and Nifty has moved up 12,334 points from 7,511.

Thanks to massive balance sheet expansion by the U.S. Federal Reserve and the European Central Bank (ECB) during the pandemic, the world is awash with liquidity. Despite recent hikes in interest rates, money is pouring into Indian equities in search of higher return.

Interestingly, in 2022, India, the fifth-largest stock market (Nifty) posted a gain of 4.3%, while the top four, including the U.S.A. (S&P 500), China (CSI 300), Germany (DAX), and Japan (Nikkei 225) posted negative returns of 18%, 21%, 12.35%, and 9.37%, respectively. In the last one year, between July 21, 2022 and July 21, 2023, the Nifty has returned around 19%, almost three times more than what bank FDs offer on an annual basis.

Follow The Growth

So, what’s behind the resilience of the Indian stock market?

While the developed world is parched with recession, India offers an oasis of growth where real GDP is still expanding at 6.5-7.5%. On the back of stable economic growth, the Nifty 500 companies that represent 92% of India’s total market capitalisation posted an all-time high profit of ₹11.1 lakh crore in FY23.