The 30-share Sensex of BSE was 28,000 in April, 2020, which is currently above the level of 52,000 points.
New Delhi. State Bank of India (SBI) economists have said that despite the decline in the world’s major economies last year, the market capitalization (market cap) of Indian companies has grown the fastest. However, the country’s Gross Domestic Product (GDP) declined during this period. This may pose a risk to the financial stability of the country.
SBI economists said in the note that retail investors have shown a lot of interest in the market. The number of retail investors increased by 1.42 crore in the financial year 2020-21. At the same time, in April and May, their number increased by 44 lakhs. Economists at the country’s largest bank said the rise in stock markets during this period has been due to lower rates of return on other financial products. Also, liquidity has improved globally. Along with this, due to the restrictions on movement, people are spending more time at home, due to which they are doing more trading.
The 30-share Sensex of BSE was 28,000 in April, 2020, which is currently above the level of 52,000 points. SBI economists said gains in stock markets at a time when no significant developments are taking place in the real economy could lead to financial stability issues. As per our Financial Stability Index, it has shown the least improvement in April, 2021.
It is worth mentioning here that in the past, the Reserve Bank has also expressed concerns about the risk of financial stability due to strong rally in the stock markets. The note said that the BSE has gained 1.8 times last year, which is the highest among major economies. During this period, Russia’s benchmark rose 1.64 times, Brazil 1.60 times and China’s 1.59 times.
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