Stock market investors boost Sensex to record high, but ignore stats; experts reveal why

Stock market have been bullish in the extreme, leading to unimaginable profit for investors! Yes, Sensex is soaring even when the global cues are negative. Sensex hit its all-time high of 40,816 on Wednesday and Nifty climbed 12,000 levels and almost jumped to its all-time peak of 12,103. There is more good news for stock market investors. According to the share market experts, Bank Nifty, which scaled 31,000 may even hit 32,000 in one month's time. 

Ironically, this rise in the Indian stock indices is taking place at a time when economic stats are not that great leading to concerns being expressed in certain quarters. Why is that? As per the stock market experts, the market is rising because the domestic institutional investors (DIIs) believe that Modi Government is pro-active and it is taking initiatives like reduction in corporate tax, disinvestment of the PSUs, and RBI cutting Repo Rate time after time since February 2019, among others.

Speaking on why the DIIs are investing heavily in the Indian share market, Sumeet Bagadia, Executive Director at Choice Broking said, "The DIIs are heavily investing in the share market because they believe Indian (Modi) Government is doing a good job and they are pro-active in regard to the Indian economy. The recent reduction in the corporate tax, disinvestment of the five giant PSUs that includes Bharat Petroleum Corporation Limited or BPCL, RBI cutting Repo Rate, Rs 42,000 crore cash flow relief to the telecom companies like Bharti Airtel, Vodafone, Reliance Jio, etc. have gone down positively among the DIIs." 

He added that DIIs have a positive perception about the Modi Government and they believe that steps taken to strengthen the Indian economy will translate into rich gains on their money invested in the stock market today.

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Prakash Pandey, MD & CEO at Plutus Advisors said, "Recent reduction in interest rates on bank deposit is also a reason for the rise in DII's investment in equities. Today, interest rates given by the Indian banks are not enough to beat inflation, what to talk about the investment goals. This has forced Indian retail investors to switch towards Mutual Funds. It's a well know fact that mutual funds are an indirect investment in the equities. Your fund manager will invest your money and try to outperform the markets. This is also a reason for DIIs fuelling the Indian stock markets."

Pandey further said that in stock market, economic indicators do matter but there is also a rule that when the economy is on high, it's time to book profit and when the indicators are showcasing gloomy outlook, it's time to invest because in such period one can buy good quality stock at a lower price saying, "In January 2018 BSE Small-cap index was at 9600 levels which is today at 5600 levels. Similarly, good quality small-cap stocks have received a beating of around 40 per cent to 60 per cent during this period. Since the Modi Government is pro-active is taking all possible actions to bring the Indian Growth rate again at 7 per cent GDP growth levels, the DIIs are investing heavily into the stock market while the FIIs are in the wait and watch the situation."