Interesting competition to achieve the 5 5 trillion target

- It took 20 years for the Indian economy to become 1 trillion

- Given the current situation, it would be more advisable to adopt a cautious attitude than the current celebration in the market.

The growth of the Indian economy has been hampered by the adversity caused by the Koro epidemic. According to the recently released GDP figures, the GDP has declined by 7.5 per cent in the last financial year. This is the biggest setback for the Indian economy in the last 20 years. Apart from GDP, other important indexes affecting the economy are also turning negative. Thus, in the midst of many adversities, the Indian stock market has seen a sharp rise in the last one year. The Indian stock market, which plunged to the bottom in March, is rapidly bouncing back and moving towards a new historic level. The RBI has also taken note of the tumultuous rise in the stock market amid adverse weather conditions. And by calling this boom a bubble, this bubble of boom will burst at any time. Even after the central bank's statement, the rally in the stock market remained intact and it seems to be in direct competition with the Indian economy. The Indian economy and the market cap of the Indian stock market in a hostile environment. Out of these two, the stakes are high to achieve the ૫ 3 trillion target.

This year, both the Indian economy and the Indian equity market have managed to touch a historic figure of Rs 3 trillion. The Modi government aims to turn the Indian economy into a 3 trillion economy by 203. In such a scenario, the question is whether the market capitalization (M-cap) of Indian companies will reach this magical figure of ૫ 3 trillion before India's GDP.

It has taken 30 years for India to become a 1 trillion economy. In 2008, India's GDP reached 1 trillion. It took 10 years to grow from ૧ 1 trillion to ૨ 3 trillion, and in 2016 the country's GDP reached ૨ 3 trillion. It has taken only three years for the Indian economy to grow from 3 trillion to 3 trillion. Whenever the market cap of the Indian stock market crosses 1 trillion, 2 trillion and 3 trillion, the ratio of GDP against the market cap has crossed 1, and whenever this has happened, the market cap has shown a correction. This could happen again, as valuation standards such as the P / E ratio and the price-to-book ratio point to the red flag. There could be three reasons for the correction in the market, the first is the selling pressure due to rising bond yields due to rising inflation in the US and the second reason is the possibility of a third wave after the second wave of Corona. But if India takes control of the epidemic, the market will see a new impetus and the Indian economy will get a boost. Because of this, the market cap of the companies will reach 3 trillion.

Thus an interesting competition has now begun between the Indian economy and the stock market to achieve the target of five trillion dollars. According to analysts, the recent upswing in the Indian stock market, despite the unfavorable trend, will make it easier for the stock market to achieve this target. While there are many challenges facing the economy, the government will have to work hard to achieve this target.

Corporate profits of Indian companies are 9% of GDP ratio, which is still below their average of 7.5%. But as conditions normalize and the economic cycle expands, corporate profits will increase dramatically and earnings will increase. The global economy is recovering, which will boost the revenues of IT, pharma and commodity companies, leaving GDP growth behind.

As the Indian equity market cap rises to 3 trillion, global investors will turn to Indian companies. Only 20 large companies account for 90% of the profits of Indian companies, compared to 15% in 191. Some old PSUs will be out of the top 50 and new companies will enter. After that a big change in this situation can be seen.

In the Indian stock market, the definition of 'jinn aih scha chahag rya chucha' is very popular. However, May has proved to be an important month for the Indian stock market. Earlier in May, two major targets were achieved. The total market capitalization of the stock market reached ૧ 1 trillion in May 2009 and then, in May 2016, reached ૨ 3 trillion. Now, again in May 2021, BSE listed stocks reached new heights - their combined market capitalization reached ૩ 3 trillion. Due to this, India is considered to be the most valuable equity market in the world, close to Canada, France and the United Kingdom.

Adversity is more than a cause for celebration in the market at this time. First, unlike the previous two targets in the cause, this time, 'smart money' is being pulled out. Institutional investors, including foreign (FII) and domestic (DII) investors, have largely withdrawn funds. Another reason is that the recent rally has been driven mainly by mid and small cap stocks, indicating that retail and corporate investors are picking up in the markets. Such investors are experientially less ‘sticky’ and are considered to be relatively prone to selling in panic. Which has an impact on the market.

Thus, the market is in a celebratory mood with a boom. On the other hand, the Indian economy is facing a very conflicting situation. Global commodity boom poses a risk of inflation. The prospect of rising U.S. bond yields has increased the risk. With this issue in mind, various agencies have downgraded the growth forecast of the Indian economy. In these circumstances, investors should also be cautious. Analysts, on the other hand, are keeping a close eye on how the economy will pick up in the near future after the recent unlock process.

3 years of Nifty index completed

It has been 5 years since the Nifty-50 index of the National Stock Exchange was released. The index was released on April 18. Since then, the index has seen a lot of sunshine and reached a high of 14 last Friday.

The Nifty has grown at a CAGR of 10.6 per cent year-on-year over the past three years. Thus, the country's GDP growth and returns have been higher than that of gold. Comparing Nifty and Mutual Funds, 16 out of 5 Mutual Funds have outperformed Nifty during this period.

The 16 stocks in the Nifty-20 have risen 15 per cent year-on-year over the past three years. In which HDFC Bank, ICICI Bank, HDFC, Dr. Reddy, Reliance has done the best. While Tata Motors, Tata Steel and Hindalco have retreated. If we look at the CAGR yield of the Nifty from 19 to 2030, the highest return was 21.2 per cent in 2007 and 7.5 per cent in 2008. The negative return was 41.5 per cent in 2009 and 7.5 per cent in 2011.