GDP Down but Sensex Up
Many are predicting stock market crash but at the same time many are bullish too. It is very difficult to understand the market behavior. There should be some impact of fundamentals but not in recent times. Let's take a look of the quarterly growth of GDP and compare it with the Sensex.
What Is Gross Domestic Product (GDP)?
Gross domestic product (GDP) is the total monetary or market value of all the finished goods and services produced within a country's borders in a specific time period.
Now let's a look at the GDP growth rate since Q1 2018-19.
GDP growth is declining continuously. Indian economy growth rate in recent years is not too strong so should not it be reflected in stock market. Common understanding says, Yes, it should reflect in stock market value. To everyone surprise, it is not the case. Let's have a look of Sensex chart for two years ( Chart taken from Yahoo Finance).
If I simply try to draw a trend line then GDP growth is declining but Sensex trend is inclined.What is causing Sensex up move is topic for the discussion. I think it is " HOPE" . Hope that India will shine. So since last two year, Is it a hope that is the driving force? I do not know but one thing for sure is that current level is not justifiable.May be I am missing something but market is also missing something. Bulls are trying to keep up the market but for how long? Corona is not over. Even though we are in unlock period but still Corona is not over. All the sectors are impacted, so what next. One thing is for sure that Q1 2020-21 GDP growth will be not so good.
Conclusion : It looks like that market is waiting for the trigger to react or trigger to correct. Next GDP growth rate figure will be out on 31 Aug 2020. If in between there will not be any other trigger then 31 Aug 2020 will act as a trigger.
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