On Tuesday 3rd August 2021, Nifty 50 and BSE Sensex the two major benchmarks of Indian Stock Markets hit the all-time high levels. The Nifty for the first time crossed the mark of 16,000 whereas Sensex also touched the all-time high levels of 53,451 on the same day. Let’s discuss some reasons behind the Stock Market touching all-time high levels.
i) US Government Push towards Infrastructure:
- Recently the US Government has passed a bill to push Infrastructure worth $1 Trillion.
- With this bill, the Government aims to create capital assets for a very long period.
- Surely, this will also create a debt burden on the economy.
- But this step will have a positive cascading impact in the shorter to medium term.
- This push of $1 Trillion will certainly result in the profitability of the companies, job creation, and other such positive impacts.
ii) 10-Year Government Securities Yield:
- The 10-Year Government Securities Yield is an alternative to Equity Investments.
- This yield which touched the mark of 1.75% in recent history has now come down to 1.16%.
- This cooling down of the development of yield rate has also impacted the attractive investment avenue for investors.
iii) Huge Entry of New Investors:
- Due to loss of job, increasing savings, and time, many investors have entered into Stock Market for earning some quick bucks.
- The Stock Market appeared to be an attractive investment option compared to Fixed Income Securities for the investors especially Retail Investors.
- This entry of new investors has also brought a huge amount of capital into the market as well.
- Also, it is important to note that Foreign Institutional Investors (FIIs) are the Net Sellers in the stock market in the last 12-16 days, but domestic investors are overpowering them and hence this rise in the stock market can be witnessed.
iv) Positive Manufacturing Index:
- The Manufacturing PMI Index also reached 55.3 in July 2021 against 47.1 in June 2021.
- This rise in Manufacturing PMI Index shows expansion in the manufacturing activity in the country.
The Stock Market is witnessing several favorable factors which are discussed above and hence a decency bias can be seen from the retail investors. The only concern factor here is the Third Wave of Covid-19 and it will be important to see how severe will be this wave keeping in view. The vaccination pace too and how this third will overall affect the corporates and the economy as a whole.