Why RBI is worried about a rising Nifty?

Unprecedented fund flows into equity mutual funds, a rising amount of demat accounts, and a surge in the portion of retail trading through discount brokerages are all making some experts fear that equities may have reached unsustainable valuations.

What causes a stock market bubble to form?

Typically, a bubble is created by a surge in asset prices that is driven by exuberant market behavior. During a bubble, assets typically trade at a price, or within a price range, that greatly exceeds the asset’s intrinsic value (the price does not align with the fundamentals of the asset).

Why is Sensex up?

Sensex surges as Street cheers govt’s excise duty cut. Shares of logistic companies also rose on the perception that lower diesel prices will provide relief to the sector’s margins. Shares of VRL Logistics, Allcargo, and Container Corporation of India rose 2-7 per cent in the session.

Is Indian stock market a bubble?

For the first time in the Indian equity market history, on 24 May 2021, the market capitalisation touched a significant $3 trillion mark. According to the report, this order of asset price inflation in the context of the estimated 8 percent contraction in GDP in 2020–21 poses the risk of a bubble.

Is there a bubble in Indian stock market?

The stock market is in a bubble territory with prices being driven by liquidity and not fundamentals, Nikhil Kamath, co-founder, Zerodha & True Beacon, told Fortune India in an interview. There is no underlying reason for the markets to have rallied in the manner that they have,” says Kamath.

Is Indian stock market in a bubble?

It recently overtook France to become the sixth-largest equity market globally in terms of market capitalisation. The feather on the cap was the Sensex going past 60,000 and the Nifty inching close to 18,000. The rally is not a bubble as various factors have contributed to the Indian market’s growth story.

Is India in a stock market bubble?

Is India’s stock market in a bubble?

NEW DELHI: The Reserve Bank of India has hinted that Indian equity markets are in a bubble, and that high valuations in the market are far from the ground realities.

What is driving the current rally in Indian equity markets?

Siji Philip, senior research analyst, Axis Securities feels that the current market rally has been supported by ample liquidity through high foreign portfolio investment (FPI) inflows and sharp rise in direct participation of retail investors. Foreign institutional investors have brought in $37.6 billion into Indian equity market during 2020-21.

How irrational is the Indian stock market in 2021?

In 2020-21, Sensex returned 68 per cent, even as India’s GDP contracted 7.3 per cent. The ‘irrationality’ of the market was evident when Sensex gained over 3,154 points, or 6.5 per cent, in May 2021 amid one of strict lockdowns with almost all business activities operating at a limited scale.

What should retail investors do when the equity markets crash?

No matter how the equity markets are behaving, retail investors should stick to basic tenets of investments – diversification, asset allocation, rebalancing of portfolios. According to Dhirendra Kumar, CEO of Value Research, the sharp corrections are a normal feature of equity investing so no one should be surprised by them.