Booming markets

Stock markets have scaled all-new, lifetime peaks on Thursday. The benchmark BSE Sensex zoomed past a historic 32,000 mark. In the process, it soared over 232 points, ending the bullish day at 32,037 points. Moving in tandem, 50-scrip NSE Nifty witnessed an upswing of 76 points to close at a fresh lifetime high of 9,891 points.

Stock markets tend to factor in future developments. So, the Thursday’s bullish trend is partly linked to the growing hopes that the Reserve Bank of India will go for a rate cut before or at the next monetary police review meeting scheduled for August 2.

As per the government data released on Wednesday, retail inflation fell to a five-year low of 1.5 per cent in June, fueling rate cut hopes. It was the lowest reading since a new index was adopted in 2012. The inflation was 2.18 per cent in May.

The government also released data of Index of Industrial Production (IIP) or factory output for May on Wednesday. IIP clocked lower growth of 1.7 per cent as compared to 8 per cent in the same month a year ago. This fall in factory output numbers are mainly due to dip in mining and manufacturing activities during May. The IIP reading further strengthened the case for rate cut as lowering of key interest rates will be essential to boost industrial output.

Apart from these domestic positives, global cues also played key part in driving the stock markets up on Thursday. In fact, the current market rally that began at around the same time Gujarat strongman Narendra Modi took over India’s Prime Minister three year ago largely owes its upward trajectory to global cues.

Most of the global stocks including those in the US, the world’s biggest economy, have been rallying for the past three years and many analysts here in India say the Indian market rally is also part of the global rally, but with active support from domestic developments.

The rally is so strong that it helped BSE Sensex rise from around 20,000 three years ago to 32,000 points now, adding over a whopping 10,000 points. In the process, investors’ wealth zoomed by over Rs 29 lakh crore.

BSE Sensex took just 33 days to scale by 1,000 points to 32,000 points now, buttressing the strong bullish trend in the stock markets. Broader Nifty is now just shy of hitting 10,000 milestone. It needs to add just 109 points to notch up the record. Going by the way markets are racing, Nifty may complete this record in a day or two.

But will this bull run continue for long? It’s very unlikely. The bullish trend is likely to continue till RBI monetary policy meeting next month. Thereafter, there is every likelihood of markets going down steeply. There is also an increasing view that Nifty will retreat after crossing 10k mark, and will go down to 9k level.

That means festive mood in Indian stock market will not last long. But will there be a market bust? It depends on global markets and geopolitical developments. It’s high time investors exercise caution!