Bull market logic

On June 4, the Lok Sabha election results shocked the markets and jolted the ruling Bharatiya Janata Party.

- DEBASHIS BASU

But the markets were perturbed for barely two hours. By noon, stocks started recovering and within a week surpassed the all-time high it had hit just before the election results. A month later, as the steady upward drift continued, the indices were much higher still, belying worries about a hobbled minority government. On the day the Union Budget was announced, the markets fell due to the imposition of higher taxes on capital gains. Investors took two days to digest the uninspiring Budget provisions. On the third day after the Budget, the indices charged up again, recording handsome gains. Internationally, wars are raging in Ukraine and West Asia, pushing up shipping costs and time. Domestically, worries include electoral setbacks for the ruling party, poor consumption, jobless growth, and high actual inflation, combined with extreme valuations in certain pockets of the economy. And yet, the markets are scaling news highs. What gives? With the benefit of hindsight, here are the set of factors fuelling the bull market.