Sensex Bull Rally
8 months- 166 sessions.
Wonder what these numbers are? Well, that’s the time taken for Sensex to hit the 60k mark after crossing the 50k milestone on 21 Jan ’21. It hit the 60k peak in a record 166 sessions which is its fastest 10k points rise ever. This rally has made investors rich by ₹75L crores this year and India’s market capitalization has reached to nearly $3.5 trillion (37% increase this year). In this process, India overtook France in market capitalization and is now the world’s sixth biggest stock market, thanks to the ~26% surge in Sensex this year. It is now within touching distance of fifth placed UK with a market cap of $3.7 trillion. With the rally going strong, we can expect India to enter the top 5 very soon.
So, what exactly is leading this rally which has been going on since the dip in March ‘20?
The decrease in COVID cases and the steady increase in the vaccine inoculation rate has been a major factor. Along with this, improvement in economic activities, liquidity from retail investors, low interest rates, low US inflation and FPI revival are a few other factors.
Sectors which have led the rally:
Since 21 Jan ’21 (Sensex touching the 50k mark), the following sectors have led the rally in equity:
Metal: 74%
Industrial metal prices reached an all time high globally and increased steel demand from China.
Realty: 58%
States cutting stamp duties and low interest rates.
IT- 33%
Contract wins from global businesses along with good quarter earnings for all major companies.
Auto- 11%
Increase in demand for light and heavy motor vehicles, clearance of PLI scheme by the government.
(Horizontal black line in all charts give the intraday high of 21 Jan ’21)
Will this keep on going or is there an end to this bull run?
In the short term there are bound to be slight corrections as has been the case whenever Sensex crosses a 10k mark (although around the 40k mark, the dip was majorly due to COVID).
However, according to Goldman Sachs Group, given the current trajectory India might touch a market cap of $5 trillion by 2024 majorly due to the addition of new IPOs along with the unicorn boom for startups. India has added close to 33 unicorns this year alone with 5 startups joining the $1 billion club in just the two weeks of October. The total funding is nearing $30 billion this year compared to $10.8 billion last year. These companies are expected to add about $400 billion worth of market cap.
Different stock indices across the globe had a major surge when their country’s economy grew from $2 trillion to $5 trillion and during the years it followed. For example, the US hit the $5 trillion mark in 1988 (the first to do so) and between 1988–2000, Dow Jones index jumped from 700 to 12000 (almost a 17-fold rise).
With the current trend and history being kind to the countries nearing the $5 trillion-mark, one can say that we will touch the elusive mark in the near future.
$5 trillion economy, here we come! :)
Thanks for reading.
