India’s stock market has been on a relentless rise, reaching unprecedented levels, despite the Covid-19 experience. There are obviously several factors behind this, but primarily it has to do with the resilience exhibited by the Indian economy in the face of gloomy predictions by experts. This is indicative of the considerable autonomy from global factors that the economy has achieved despite the consistent effort to integrate with the rest of the world over the past couple of decades. Experts are also of the opinion that multinational corporations are impressed by the manner in which the Indian government dealt with the Covid challenge, as also its determination to introduce reforms. Considering that most developed nations are very hesitant now to invest in China – the favourite for long – because of several factors, they are now placing their bets on India.
While the behaviour of the stock market may be indicative of the general sentiment, this does not mean it is a complete indicator of economic health. It can be easily spooked by events, while speculative behaviour also has a role to play – sometimes contrary to the ground reality. Stock prices are likely to fall just before the announcement of the Budget because of profit-taking and, also after, if certain policies do not match up to the expectations.
It is anyway a certainty that the decline in the GDP is going to be nowhere what was predicted. Going by the quarterly results announced by various segments of Industry, there has been a positive impact not just from pent-up bounce in demand, but a general robust behaviour among consumers that has continued. The challenge has been for industries to scale up from the lockdown situation as innovatively and intelligently as possible. It seems that most have been able to do so. Industry seems also to have adjusted well to the change in practices such as WFH and increased online buying. It is also important to note that during and after the lockdowns, local retailers that played a significant role in keeping people supplied with necessities have found a fresh lease of life.
However, the old challenge still remains of overcoming the hurdles imposed by adherence to outdated practices because of bad experiences in the past (as exhibited by the agitating farmers), poor quality of administration, a general lack of skills necessary at every level, the drag imposed by sections of the populace that are still denied growth opportunities, vested interests, etc. Despite all this, however, India is on the cusp of a great leap forward from the damage suffered last year. Perhaps, that is the basic message the stock market is trying to convey – don’t miss the opportunity.