The Indian stock market is at its peak and right now, there’s only one question on everyone’s mind: Should they invest money in the stock market? Is there a chance for stocks to inch higher or is the upward trend unlikely to hold for long?
Why Are the Indian Markets Happy?
It’s a well-known fact that there is no relation between the economy and the stock market. But in today’s context, there are several questions in the minds of people because the GDP growth has hit the lowest in four years, and the signs of revival in the industry are not very clear.
On one hand, inflation is on the rise and on the other, interest rates are not falling. Yet, the markets are witnessing an upward trend.
The answer to this lies in the general upward trend in global markets, which is being tracked by the Indian markets. US markets, in particular, are a sea of green as investors are buoyed by the strong economy and Trump's new tax plan.
Foreign Markets Responsible for the Boom
There is no clear sign that the quarterly results of companies will be positive yet the stock market rally has been continuing since five weeks. Sensex, Nifty and the Mid-cap index have been major gainers. With the influx of foreign exchange, the rupee hit a 32-month high against a weak dollar.
The rise of rupee can’t be taken lightly, as it indicates that Indian markets have become a preference for foreign investors. Foreign investors have invested more than $ 7.5 billion in the domestic market in 2017. But the real credit for the acceleration of the domestic market are the small investors who have invested $20 billion in mutual funds.
Shares Worth Investing In
Small-cap stocks have left behind the big stocks in terms of returns, especially due to the rapid increase in metal prices such as copper, aluminium, zinc in the world.
The health of stocks of pharmaceutical companies has also improved. But the biggest turnaround is in the IT sector. So far, IT shares were lagging behind other stocks. The upward trend has convinced fund managers that the risks of investment in IT sector have reduced and the probability of returns has increased.
The Market’s Concerns
The biggest worry is that even after the decision of recapitalisation of banks and issue of bonds, there are no improvement sin the condition of the banking system. A steady increase in the stock market is necessary for the rise of banking stocks because they carry a lot of weight in Nifty. However, the burden of debt and NPAs on the banks is still a problem.
Long Term Capital Gains Tax In Budget?
The stock market keeps an eye on the budget for two reasons. First, to find out how investors may benefit and second, what will be the tax structure. Since the GST has been implemented, there will be nothing more in the budget on the indirect tax front.
Another question is that will the finance minister give some gifts to the investors? But due to the burden on the treasury, as of now, this seems highly unlikely. In all probability, the government will not implement long-term gains tax.
Should You Invest Now or Not?
Till the upward trend in global markets continue, the Indian market will also be on the rise. But, if the dollar becomes becomes stronger then the health of Indian markets will be at stake.
Video Editor: Mohd Irshad Alam
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