On 22 March 2020, Prime Minister Modi imposed a nationwide lockdown amid the rise of coronavirus. The lockdown affected the nation in myriad ways including a sharp rise in unemployment, stress on the supply chain, the collapse of the tourism and hospitality industry and many more.
In June 2020, Global Economic prospects released data which showed that the world economy was facing its worst recession since World War II and that the growth was expected to shrink by 5.2% in 2021. India is facing a huge recession, as the monthly unemployment rate in April stood at 23.52% up from March’s 8.74%. Due to this pandemic, not only jobs, but companies were also affected.
Till June 2020, a total of 6.8 lakh companies had been closed across India. Companies situated in metropolitan’s cities suffered a huge loss, as over 1.42 lakh companies were shut down in Maharashtra, more than 1.25 lakh in Delhi and over 67000 in West Bengal. Companies who tried to stand in the worst-hit faced reduction in the cash flow. If we talk about MSMEs, 50% of companies have reported a 20-50% impact on their earnings, as per a survey conducted by Non-Banking Financial Company Magma Fincorp and Business School Bhavan’s SPJIMR.
India’s GDP fell hugely even before the pandemic. In the Q1 of F.Y. 2020-21 (April – June), GDP contradicted by -24% which was the largest GDP contradiction ever. Whereas, the Stock Market is raging high even in the pandemic. On 23 March 2020, Bombay Stock Exchange Sensex closed at 25,981 points and on 9 November 2020, when the pandemic was still raging in a large manner, Sensex hit at 42,597.43 points.
How Is It That When GDP Faces A Contradiction, Stock Market Is Booming?
Now, let’s see what the Finance Minister, Financial Analyst, Investors and Brokers want to say about this.
According to the Finance Minister, Nirmala Sitharaman, during the lockdown people started investing in the Stock Market with the savings they had and for the investment, there was a surge in the opening of Demat Account. She proved her statement by saying that in pre-covid times, around 5-6 lakh Demat Accounts were opened, while in the month of October 2020, nearly 10 lakh Demat Accounts were opened. Whereas, Shaktikanta Das, Governor, RBI, said that “There is so much liquidity in the system in the global economy that’s why the Stock Market is very buoyant and it is definitely disconnected with the real economy.”
On the other hand, Financial Analyst said that, if the delivery percentage in the stock market is high, people bought shares as an investment. And on the contrary, if it’s low, speculators will be more than the investors. In June 2020, the speculation level in India’s Stock Market was the highest in 15 years. Nowadays, youngsters are more into Intra-day trading, which means people buy shares when the market opens and sells it post-lunch, which is the reason behind the surge in the Stock Market.
What Grabs Our Attention Is The Foreign Investors!
In June and the previous month, Indian Mutual Funds and Domestic Investors took their money out from the Stock Market. But, Foreign Investors invest nearly 22000 crore in Indian Stock Market which is the 4th highest value in the last 5 years.
Why Do Foreign Investors Gush Huge Money In India’s Stock Market?
Stock Market and billionaires’ wealth is at great heights. In this pandemic only two things are flourishing, i.e; Stock Market & Billionaires Wealth. According to Billionaires Insights Report 2020, published by UBS & PWC, between April to July, the net worth of Indian Billionaires increased by 35% to $423 Billion which is faster than their Russian Counterparts.
Let’s check the position of India’s billionaires:
I. Forbes India Rich List 2020:
Mukesh Ambani’s net worth rose 73% over the past year to nearly $88.7 billion; Gautam Adani’s net worth stands at $25.2 billion. Adani remains in the wealthiest Indian for the 13th year in a row; HCL Founder Shiv Nadar stands at $20.4 billion.
II. Bloomberg Bill Index:
Reliance India (RIL) Chairman Ambani, became the only Asian Tycoon to be among the world’s top 10 richest people. Oxfam’s report states that India’s richest 1% population hold 42.5% of National Wealth, while the bottom 50%, that is the majority people, own merely 2.8%.
So, Economy Plunges, Stock Market Shoots Up!
The rich are getting richer, middle and poor sections are getting meagre!
India faced the largest contradiction in GDP, still, the Stock Market is raging. There is a sharp rise in the unemployment ratio, still, the wealthier are getting wealthiest. Finance Minister and Financial Analyst gave every possible explanation to not let us think whether the history of the 1992 Scam is repeating itself.