Stock Market as an economic indicator

In recent times, the global economy is under depression due to COVID19 and which reflects in the world’s stock markets. If we look at Indian stock indices, in last three months Nifty 50 and Sensex both have given negative 28 percent returns. Owing to this pandemic, investors in the Indian stock market have become poorer by almost Rs. 50 lakh crore in the last three months. This situation of stock market reflects the fear of economic slowdown worldwide in the minds of the investors.

After many corrections since January 2020, on 7th April, Nifty 50 recovered 708 points and Sensex recovered 2476 points behind expectations of positive actions through stimulus packages by Indian government for economic recovery. It means stimulus package has a much bigger impact on stocks and it does on economies. If stock market is more sensitive to such events in short term than economy is, the market could recover much earlier than the economy in response to the fiscal and monetary stimulus.

The outbreak of COVID19 will definitely impact on world as well as Indian GDP growth. But history is witnessed and Indian investors also faced such situation in past, and investment during such bottom market will create wealth.

Author:
Dr. Himanshu Barot, Professor, Unitedworld School of Business (UWSB)

Disclaimer: The opinions / views expressed in this article are solely of the author in his / her individual capacity. They do not purport to reflect the opinions and/or views of the College and/or University or its members.