FACTORS DRIVING THE LIVE SHARE MARKET IN INDIA
The live Share market in India had a quick recovery of up to 42% from the great fall that took place in March 2020. The market has seen a sharp V – shape recovery, which has made all the investors make a profit.
Even after the moratorium on bank EMI’s and an increase in NPA %, Shares of bank nifty have grown towards 36% from 16335 to 22000. There are many factors determining this growth.
Let us have a clear look at the factors driving the live share market in India.
DEMAND AND SUPPLY:
In Economics, both demand and supply have been in the same weightage. If any equilibrium is missed, there comes an economic crisis. The 2008 economic slowdown was due to depreciation in the supply side. The crisis associated with the COVID-19 pandemic is the demand side.
Last year, around July – August the market was in the shape of a crash, then our Finance minister announced the cut-down of taxes to corporate from 35% to 21%. This made a huge sound in the share market and the indices started booming up.
Even though, the share market was in a bullish way. The economy was decreasing in the demand side. As the demand side has sharply come down, there was a huge layoff in major IT, automobile, and in some manufacturing sectors.
These sectors are still under recovery and the major automobile manufacturing and real estate companies are at a heavy loss due to no demand in the market. The bike and car sales have come down more than 60-70% when compared to 2018. There are many apartments left unfilled in major cities.
After this COVID-19 crash, where the total world is under lockdown. Many MSME couldn’t do its business due to heavy loss and many of them are bankrupt.
Due to 3 months of lockdown, many people have loosed their jobs and still these parameters contribute to a decline in demand.
Until demand is increased in the market, there is no use of supply generation. If the supply-side has no work, still it affects the workers of manufacturing companies. This again adds on weight to decrease in demand.
GLOBAL MARKET VS INDIAN MARKET:
· The most important thing we need to analyze is a relationship with the global and Indian market
· When India has met with the 1st Covid-19 case. Most of the countries were hit hard by COVID and their economy were seriously hampered.
· Indices like NASDAQ 100, S&P 500, SGX NIFTY, and other Asian indices were in 52-week low. Then came the Indian Index to fall from later February and hard-hit in March.
· The interesting analysis here is except India, all the other indices have reached more than their value in January 2020.
· Nifty 50 index is still 1100 points lower than the January value with a degrown of 9%. A pretty banged.
· The reason behind is only a few company shares are been performing.
THE REASON OF RECOVERY FROM MARCH:
· Almost 6.18 lakhs of DEMAT account has opened in March 2020, post the crash. Source: CDSL
· Followed by another 6 lakhs of new accounts in April. This added nearly 12 lakhs of new retail investors in the game.
· Most of the investors choose online brokers due to trading charges and margin. So, as per the record, many traders have joined than investors. These traders along with FII and DII took the market a sharp recovery.
· There was a strict penalty laid for the margin used in short-selling. This made most traders move out of short selling. Ultimately the sell option was minimized.
2. MARKET CONDITION:
· The market has shown sharp growth in Index and few sectors like pharma and IT.
· The Nifty 50 Index has the top 10 companies to share a weightage of 65%. In which Reliance Industries (RIL) alone has a share of 15%.
· RIL opened the right issue of Rs. 53, 125 Crores on May 20, 2020. This was the largest right issue ever in the last 10 years.
· RIL has raised funds from all major investors over the world for 2, 12,809 Crores. This was majorly to make them a debt-free company. This infused cash flow into their buckets.
· HDFC, HDFC bank, ICICI and major companies of India have raised funds by selling their stakes.
· These are the reason for earnings in the market. The reality is different.
· Trader have pumped in their capital to get some monthly income as most people have lost their job.
3. NIFTY 50 INDEX WEIGHTAGE:
· As I have informed previously on the Nifty 50 Index, top companies hold the 65% weightage.
· These are the companies that hold the market to be in a bullish way.
· The current market is been traded at P/E of 29. The 29 is with respect to March 2020 earnings results. But, when we forecast for the earnings of March 2021, the same price will be of 35-40 times of the earnings.
From the above image, there is clarity shared. RIL has been the main reason, why the India Share market index is in a positive trend. It almost holds 150% growth in just 3-4 months.
The total growth of Nifty 50 is 43% and it is seen in the top 10 companies clearly. The other 40 stocks don’t have much participation with the growth of nifty 50.
REALITY OF THE MARKET:
· RBI has shared its Finance Stability Report, in which it has stated clearly that Gross NPA of banks will be 14.7% from 8.5% in the worst case.
· There is no positive news on vaccines and COVID confirmed cases are increasing day by day. It has reached 20 lakhs cases
· The pharma sector the boom has come to an end.
· The demand in the market has completely come down. The service sector which holds 50% of the country’s GDP is completely in a bad shape.
· SEBI and Institutional investors are trying to keep the momentum of the market between 10500 – 11300 for the next 2 – 3 years. So, investing in a high price is going to give only 1 or 2% return per year.
· Investors should be very vigilant on the stocks they choose before investing.
· Once again I would like to insist, invest in the business, not on price.
· Wait for countries economy to revive back and the GDP to grow on the positive side.
· The rights issue or stakes selling is not a real source of income. It can keep the company only to operate.