The BSE Sensex crossed a psychologically necessary mark of 50,000 this morning for the primary time. It has virtually doubled since March when the world went right into a shutdown mode to fight the pandemic. Since then, the IMF has forecast a worldwide recession for 2020. The federal government’s statistics ministry has forecast a recession for India in 2020-21.
So, what’s driving this surge? Essentially the most believable reply is the surfeit of central financial institution cash, the primary line of defence in lots of international locations to restrict the financial shock of the pandemic. The accessible proof means that it has performed a major function in pushing fairness costs, which has proven up within the Sensex motion.
There’s a lot that is still unclear about how economies and thereby corporations will recuperate after the pandemic. However it’s unlikely that central banks will instantly suck out liquidity from the system.
Retail traders ought to nonetheless be cautious. There are incipient indicators of inflation hardening on the again of a rise in worth of many commodities. This may put strain on central banks to take a couple of steps again from the present state of affairs. It’s at all times clever to be cautious when the inventory market seems to defy gravity.
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