The Indian stock market is only one step away from a new high. Mumbai Sensex 30 index (equivalent to A-shares Shanghai and Shenzhen 300) has increased by nearly 700% in 13 years since 2008, embarking on a magnificent bull market.
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The epidemic in India is so serious, why can the stock market rise 150% in 2 years?
In 1999, India's GDP was US$458.8 billion, ranking 13th in the world. In 2021, India's GDP will grow to US$3.08 trillion, ranking sixth in the world, second only to the United States, China, Japan, Germany and the United Kingdom.
The International Monetary Fund IMF predicts that India’s GDP growth will reach 9% in 2022. The IMF's expectations for the Indian economy have always been high, but their forecasts have been inaccurate many times.
But as an emerging country, India’s period of rapid economic growth is a high probability event. Whether it is Europe, the United States or East Asian countries, during the period of rapid economic development, there will often be bull markets. This is probably also the expectation of funds. Of course, this is only one of the factors that makes the Indian stock market bullish.
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Although population size is an advantage , the physical quality of India's population is low . India's infant mortality rate ranks first in the world, and data such as average life expectancy are not very good. Secondly, the cultural quality of the Indian population is low . Taking India's ten-year compulsory education as an example, the enrollment rate in the fourth and fifth grades is less than 60%, and the dropout rate in the fifth to eighth grades is as high as 50%. Furthermore, India racial issues are still a big obstacle. Therefore, there is great uncertainty in both the expectation of high economic growth and the potential of demographic dividend. But the game played by capital is ultimately about hazy beauty. When something is expected, the capital market will react, and sometimes the more disagreements there are, the more they like it. All fluctuations also depend on the expected shaping of funds. Many international capitals flow into the Indian stock market, which is fundamentally due to the money-making effect. As for the results, for capital, it is all about speculation first. In addition to long-term economic growth and demographic dividend, the most fundamental thing is the promotion of funds-the release of liquidity.
In the early days of the outbreak, the Indian stock market fell by more than 10%, and the Bank of India immediately launched a rescue package: cutting interest rates by 75 basis points within a week to 4.4%; cutting the reserve requirement ratio by 100 basis points to 3%; and also announced a targeted long-term The refinancing operation will be as large as 1 trillion rupees (approximately US$13.5 billion).
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(Source: Oriental Fortune )
is the first in the world. For a simple comparison, the central bank of China the deposit reserve ratio for large financial institutions is 11.5%, while the latest data for the deposit reserve ratio of the Bank of India is 4%. One can imagine how big a game Indian banks have played. Under this background, liquidity has increased, and foreign capital, institutions and small investors have entered the market together.
Speaking of India, the "clean and hygienic" curry-flavored hand rice, flying pancakes , trains full of people, and generic medicines can't help but come to mind. India is a magical country, both poor and rich. There are Tata Group that ranks ahead of Ali and Tencent among the world's top 500 companies, as well as Mukesh Ambani , the director of Asia's richest man Reliance Group . Reliance Industries is the company with the highest market value in India, with a market value of 1.5 trillion yuan.
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The company is engaged in hydrocarbons exploration and production, petroleum refining and marketing, petrochemicals, retail and digital services businesses globally. Founded in 1966, it is the largest private group in India and the second largest private group in the world. Mukesh Ambani, the largest shareholder of Reliance Industries, is Asia’s richest man and ranks 11th globally.
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Tata Consulting, with a market value of 1.2 trillion yuan, was founded in 1968 and is headquartered in Mumbai, India. It is India's largest single IT services exporter.
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Judging from the Indian stock market constituent stocks , India's pillar industries are banking and financial services. Among the constituent stocks, the banking and financial services industry has the largest weight, accounting for more than one-third; followed by energy, IT, daily consumer goods and the automotive industry, totaling more than 45%. The weights of industries such as medicine, metal and telecommunications are all below 5%.
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(Source: British Financial Information) India's pillar industries are not generic drugs, IT, and consumer goods as we think, but the banking and financial services industries. In fact, this is not difficult to understand. This is the evolution path of industrial development in various countries. We can find the shadow of India's economic structure and bull market in China's 2006-2007 bull market. The basic characteristics of the global economic cycle to the bull market show certain regularities.
Looking at the history of stock market changes in developed countries, during periods of rapid economic growth, there are often magnificent bull markets, and they are all fast bulls. Because industry profits are growing rapidly, companies in all walks of life are reaping incremental dividends. During this period, the market is optimistic about economic expectations. Once liquidity is relaxed, fast bulls will often appear. By analogy, from 2006 to 2007, there was also a vigorous round of fast bulls in A shares. From a structural point of view, at that time, the banking, finance, and resources industries were also leading the way, and large-market capitalization companies were all resource stocks and banking stocks. The underlying reason is that the rapid economic expansion of requires resources and financing, and these industries naturally have high prosperity. However, this kind of ferocious bull market is often prone to overdraft. When economic growth expectations, retail investors and incremental funds (monetary policy cools down to deal with overheating) marginal effect weakens, it usually goes bearish quickly under the influence of external forces. For example, at the end of the A-share bull market in 2007, the currency was relatively tight and policies were introduced to cool down the stock market. It is usually a rapid alternation between bulls and bears, and the fluctuations are very violent.
When the economy enters a stable period, the characteristics of the bull market often change. The most typical feature is that is no longer about letting a hundred flowers bloom, but about the strong always becoming strong. This is determined by the internal structure of the economy.
In other words, when the economy develops to a certain stage, demand is saturated, and supply-side reform occurs, many companies will be eliminated, leaving only a few leading companies. Their competitiveness is strong, market concentration continues to increase, the strong will always be strong, and funds will Increasingly concentrated on leading companies.
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When the economy reaches a stable period, the cash flow of these companies becomes stronger and stronger. In the later period, they will continue to repurchase stocks, inject incremental funds into their own stocks and the market, and slowly push the market upward.
The stock market market at this stage is often structured and driven by a small number of companies. Compared with the period of rapid economic development, it presents a pattern of advancing, retreating and slowly rising, and the time dimension is longer. The changing patterns of European and American stock markets have been characterized by this in the past 10 years.
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Returning to the present, China has entered a period of stable economic development. Now the economy is severe. The real economy is no longer growing at a high rate. There are very few opportunities to get rich like in the past when a hundred flowers bloomed. Leading companies in various fields have also mastered a large number of things that are difficult to achieve in the short term. The subverted resources made them stronger and stronger.
Different eras have different characteristics, and investment is an art that changes with time. Who do you think will be on the list of the strongest in the future?
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