Four Reasons Why the Indian Stock Market is Witnessing a Bull Run

The Indian Stock market's bullish run is going on for quite some time now, however, this week the market seemed to be in an overwhelming mood.

Today, for the first time ever, India woke up to the news of BSE Sensex breaching the 36,000 limit whereas; its peer NSE Nifty also crossed the critical level of 11,000. If you are the one who still has no clue what is up with the Indian market, then continue reading to understand the four major reasons behind the bullish sentiment among investors:

Positive Global Sentiment

Yesterday, the International Monetary Fund launched its World Economic Outlook at Davos, Switzerland; the venue of the annual event is World Economic Forum. The report projects that Indian GDP will grow at 7.4 per cent and 7.8 per cent, in 2018 and 2019 respectively, pegging the country to be fastest growing economy among emerging countries. In 2016, the country grew at 7.1% in 2016 and the economy slowed down further due to the disruption caused by demonetization and GST.

The report also stated that "Global growth for 2017 is now estimated at 3.7 percent, 0.1 percentage point higher than projected. Upside growth was particularly pronounced in Europe and Asia but broad-based, with outturns for both the advanced and the emerging market and developing economy groups exceeding the fall forecasts by 0.1 percentage point."

The stronger momentum experienced in 2017 is expected to carry on into 2018 and 2019, with global growth revised up to 3.9 percent for both, it added.

According to Soumen Chatterjee, Head of Research, Guiness Securities, IMF's projection of global growth has given a boost to investors' confidence.

Union Budget

During a television interview, earlier this week, Prime Minister Narendra Modi remarked that the upcoming Union Budget for FY 2018-19 will not be a populist budget and said it is a myth that common men want freebies and sops, instead they demand good governance.

Pankaj Karde, Head of Institutional Sales & Sales Trading, Systematix feels the PM's comments have also boosted the bullish run scenario in the Indian market.

Furthermore, the Union Budget is expected to boost the economy, especially reducing corporate tax rates, he shared.

Domestic Factors

Back at home, Chatterjee asserted that better than expected corporate earnings and robust direct tax collection numbers have supported the current momentum.

This week Asian Paint announced a 16 per cent increase in the Q3 net profit, similarly, Axis Bank and DHFL registered a 25 per cent profit in the last quarter, GNFC's profit rose by 241 per cent and Havells India's numbers grew by 27 per cent.

Such positive result suggested the India Inc. have moved out of the so-called GST- demonetization disarray and there is an upswing in growth and demand in the Indian economy.

Additionally, the Nov IIP growth at 8.4% and robust growth in specific sectors like manufacturing augurs well for the current uptrend, Chatterjee shared with Entrepreneur India.

Tax Saving Instruments

With the financial year 2017-18 coming to end, local funds are getting a lot of fresh inflows in tax saving equity instruments, making the rally continue, Karde affirmed.

Bubble or For Real?

Nitasha Shankar, Sr. Vice President and Head of Research at YES Securities thinks the current market euphoria can continue at least till the union budget.

"It will be further led by a strong consumption pattern and better than expected performance from the IT and Banking companies especially the private sector banks," she added.

Even Chatterjee feels that till the green shoots are coming in, Nifty's 11000 mark is just a milestone and not an end of the journey.