Why stock markets are rising?

It’s 2021, the COVID vaccines are rolling out and the stock markets are making new highs. Here are some charts making sense of this new bull run

India’s overall disposable income has increased 2X in last 8 years

But we are not buying more cars

In a double whammy covid-19 struck, now we have rising disposable income > lockdown means no spending > leading to huge money left in bank accounts

This new saved money was searching for returns and the fixed income instruments have become less attractive to savers as interest rates have gone down

so these folks opened equity demat accounts in big numbers - CDSL reported their best ever year of account openings

So it is the new money driving markets?

Source

Sure it is but regionally we are much more attractive comparative to other countries for foreign fund flow

with inflows outdoing their previous highs made in 2013

so

• Low interest rate

• High retail participation and

• FII flows

are contributing on liquidity side now lets look at some data on business

Indian business are building assets (investing)

Steel productions is up

Cement Production is up

Digitisation is up

thanks to the JIO revolution

But capacity utilisation is low - Indicating possible earnings revival

At least the largest 50 companies are earning well below their median ROE, Source

So on business side we have huge capex done, lower utilisation and possible earnings revival driving market

***

It was fun exercise delving in Marco rather than Micro. No change in my investment method :) I continue to be company focussed but sometime as they we should step out of our pond and swim in sea

Until next time happy investing