Despite GDP Crash, Share Market Seems to Be Soaring – Why?

India has seen its lowest GDP in 40 years, but the share markets are booming with new investments. Why so?

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Video Editor: Ashutosh Bharadwaj

India just witnessed its worst GDP crash in almost 40 years during the 1st quarter of 2020, a staggering -23.9%. However, on the contrary, share markets have been booming in India since the lockdown was imposed.

But how is it happening and is there a relation between GDP and the share market?

Since the news of the GDP crashing broke, Sensex closed with a rise of 250 points, and if we go by numbers then the share market has been up by 50 percent since the lockdown.

What is causing the share market to boom while the economy is crashing?

Reason 1

Western and international banks are printing more money and providing loans at cheaper interest rates. This is enabling foreign investors to invest more in the Indian markets.

Reason 2

Big corporations like Reliance have contributed a huge chunk in the share markets upward trend. There has been active trading of the shares of big companies recently, which has had a positive impact on the market. However, one should also note that this is how it looks on the outside, and might be deceiving.

Reason 3

Reports have suggested that 2019 saw more than 40 lakh new investors. One of the reasons behind this might be cheaper rates on loans provided by banks. During the lockdown, people who wanted to make some extra bucks looked to the share market as a worthwhile investment.

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