resr 5paisa Research Team 12th December 2022

Why SENSEX is shining amid a gloomy recession?

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Last week, a friend of mine said, “Where do you think markets are headed? There is a global economic slowdown, massive layoffs are happening, inflation is at record levels in most nations, and amid all that Indian stock markets are rallying.

They seem to be in their universe!

Just like him, a lot of you might be uncertain about the markets, considering the prevailing macroeconomic conditions. You might be wondering, what the new year holds for the Indian market, are we in for a prolonged bear market or NIFTY will touch new highs in 2023?

So, let’s dive into it and see why the markets are rallying amid recession fears.

The first reason is the economic outlook for India is better than most of the nations in the globe. According to a report by Morgan Stanley, India is the fastest-growing nation in the world and it is expected to become the third-largest economy in the world by 2027.

While things seem bleak for other countries, we are well-positioned to double our GDP from $3.5 trillion today to $7.5 trillion by 2031. In 2023, India's GDP is projected to grow by 6.1%, higher than China's GDP, which is projected to grow by 4.4%.

Not just that, the Bombay stock exchange is expected to deliver 11% annual growth and reach a market capitalization of $10 trillion in the coming decade.

In a recent report, Auguste Tano Kouame, World Bank's Country Director in India said, "India’s economy has been remarkably resilient to the deteriorating external environment, and strong macroeconomic fundamentals have placed it in good stead compared to other emerging market economies," 

The report further explained that the challenging external environment, like rapid monetary policy tightening in advanced economies, would affect India, however, India is relatively shielded from the slowdown because India has a large domestic market we are comparatively less exposed to international trade flows than other economies. The report stated that while a decline in US growth equals a decline in India's growth by 0.4 percentage points, the effect is 1.5 times greater for other emerging economies.

Investors across the globe are bullish on the Indian economy, and a testament to that is record investment by foreign investors in Indian equities in November. FIIs poured ₹22.5 thousand crores in Indian equities last month, the highest inflow recorded in the last year.

At a time when the US is experiencing the worst inflation in decades, China’s economy is suffering due to the lockdowns and its zero covid policy, and Europe is dealing with the Russia-Ukraine war, India appears to be a beacon of hope for investors globally. 

India will definitely be one of the best-performing economies in the world. If you want to make the most of growth in our economy, then it's time you start investing in Indian equities.

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