The year 2020-21 has been a milestone in the Indian financial markets. From the low levels seen at the end of 2019-20 due to the closure of Covid-19, markets recovered to a high level in the last quarter after the approval and release of Covid-19 vaccines. BSE Sensex, the BSE rating index, fell to 25,981.24 on March 23, its lowest value since December 26, 2016, but then rose to 52,516.76 on February 16, its highest value. It closed trading at 50,136.58 on March 30.
Excellent performance among major global indicators as estimates of GDP growth among the low :
Comparison of the BSE Sensex with ten major global indicators in nine countries shows that it has been the best in this financial year (until March 29). Each year, the growth (increase) seen in FY2021 is the highest in the last decade and in the sixth place since the introduction of the index (1980).
Sensex has secured an agreement for about 24% on FY 2019-20, which is the fourth worst performance in its history. European countries, including the UK and France, have seen little growth as the following waves of Covid-19 forced them to announce further closures during the year. This rise in India’s financial markets comes just as the country’s economy is expected to see the third largest contract (-8%) in these countries according to the latest IMF data from World Economic Outlook.
What makes the increase?
This increase was facilitated in part due to the low base that existed at the beginning of the year and the high inflow of external funds seen during the year. Sensex had previously secured a 30% deal until the end of FY 2019-20 from its pre-Covid highs reaching January 14, 2020 due to the initial shock caused by the spread of Covid-19 in the first months of 2020.
With inflation in the US and other major countries lowering interest rates, Indian financial markets have also seen the highest investment in its history (₹ 2,74,108 crore until March 30) in 2020-21. The rise in stock markets and low savings rates in banks has also helped increase the participation of local home-based investors such as new demat accounts, a positive representation of stock market traders, growing by 115% until January, the largest number in the last decade.