In the country's stock market, Sensex hit a new high of 75418, Nifty 22967 and Midcap 52418 on May 23. In the last four years, the market is witnessing a bullish atmosphere only in India.
While the world is in the grip of recession, the market in our country is setting new highs. Now that the market has reached its highest level, one of the big questions facing investors is what to decide on new investments. Booms and busts are the nature of the market. If you look at the present time, it seems to be booming. If you are looking to invest in equities for the short term, investing now is risky.
If an investment is made when the market is at a high level, the value of the investment will decrease if the market goes down in the near term. Actually capital market is not a short term investment but should be considered for long term investment. Before investing, you should balance your financial goals, investment period and the amount of money coming into your home. While investing for the long term, when the market is currently at a high level, it is better to invest a small amount rather than investing all at once.
The current 'Vicks-Volatile Index' level is on the upside. That means there is a lot of volatility.
At such a time the market cannot determine the correct direction of boom or bust. Whenever there is increased volatility in the market, the market may go up or down sharply in the near term. The result of the election will be important to decide the future direction of the market. Let's say, if the result of the Lok Sabha election on June 4 comes in the Modi government, there can be a big boom in defense and government companies. At present, the market is seen to be increasing on the assumption that the Modi government will come.
Currently, the market has reached an all-time high. So how do you know if this market is expensive or cheap? For this, it is very important to see the PE line of the market. Generally the PE curve of the market is between 10 and 30. The higher the PE line, the more expensive the market. When the market is expensive, you should rebalance your portfolio. At such a time, you should reduce the amount of risk in your investment and focus on safe investment. You will notice whether the market is cheap or expensive. The current PE ratio of the market is 24.79 and the ratio of market capitalization to GDP of the country is 140%. This is too much. The lower it is, the better the investment.
The amount of investment of common people in this capital market is increasing. But the other side of the market is that the number of demat accounts in our country is around 15 crores, and through mutual funds, up to twenty thousand crores of SIPs are being invested every month. Even today, many mutual fund managers are sitting on a lot of cash. If this is the case, it is difficult to predict when the market will go down. If the Modi government's Lok Sabha election results do not go as expected, then the market will witness a massive fall. But looking at the long term, investing a little at a time today will be worth it. Because the progress of our country in the last five years is very remarkable.
It seems that the slowdown in the global market will gradually reduce. If global interest rates fall and booms start in other countries, the outcome may be different. Perhaps the inflow of foreign investors will increase and you will see an even bigger boom.
The economy growth rate is only the highest in our country. The capital market of our country has crossed the mark of 5 trillion dollars. Looking at the capital market participation in the country, the growth rate of small cap and mid cap, micro cap is very high.
A country's capital market and GDP grow in parallel with a slight margin. Looking at the country's GDP journey, it has become a 1 trillion economy economy in the sixty years from 1947 to 2007. 2 trillion economy in 2014, 3 trillion economy in 2021. 3.9 trillion economy in 2024 now. There are two stock exchanges mainly NSC and BSC in the capital market. 2266 listed companies are available on NSC, 5309 on BSC. New listed companies are being added every year. The country's economy and capital markets are growing at a marginal rate. Now the situation is a little different.
GDP is 3.9 trillion. With that respect, the market capital has reached five trillion dollars. This means, the size of the market capitalization has become larger than the GDP. Looking at the equation, the current market looks expensive. The lower the market capitalization to GDP, the better the time to invest.
Currently, the country has reached a new height. The Reserve Bank of India has given the highest dividend for the first time in the history of the country. 52600 as dividend was paid in the year 2013-14. 2.11 lakh crore has been given this year in the year 2023-24. Dividend has increased four times in last ten years. It has paid the highest dividend till date. This shows how fast the country is progressing. The positive effects of this dividend can be seen in the market. Substantial dividend transfers to the government can increase liquidity in the market. This increased liquidity can also increase demand for financial assets, including stocks and bonds. RBI Bank paying such a huge dividend shows the country's confidence in the economy. This positive sentiment may encourage foreign investors, potentially increasing participation in the stock market.
In the long term, India is currently the fastest growing economy in the world. Investing in the capital market for a long period of time will definitely bring you huge benefits.
The journey of small cap and midcap, micro cap is as follows.
May 2007 – 1 trillion
July 2017 – 2 trillion
May 2021 – 3 trillion
Nov. 2023 – 4 trillion
May 2024 – 5 trillion
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