A person buying the Sensex stock in May 2014 would have become richer by about 20% now. This might just be “the beginning,” says Vivek Gupta, equity analyst, CapitalVia Global Research. If such a person stays invested in stocks, the time for good returns might not be far away as “the stock market is bracing up for another big rally.” India’s commendable GDP is the main trigger for equity markets moving up in advance and preparing for a big rally. The bullish mood in the market basically authenticates investor’s confidence in the government’s economic policies that has helped India cement its status as the fastest growing economy, growing at 7.6% in 2015-16. India’s beneficial net oil importing position and a strong reliance on domestic consumption has helped it to strengthen its economy in 2015, making it a bright spot in the challenging global environment, says IHS Global Insight. The biggest catalyst for the upcoming rally would the softening of interest rates that has come down from 8.5% a couple of years ago to 7% now. Inflation and other macro fundamentals are pretty much in control. “The modest increase in minimum support prices (MSPs) for kharif (summer) crops reaffirms the government’s commitment to good economics over populism,” says a Nomura research paper. The RBI’s effort to clean up the mess in our financial sector is sending positive signals to stakeholders about the positive intent of the government. Public sector banks whose shares have plunged by over 45% in the last couple of years offer a good buying opportunity as these are expected to move up here onwards.
GST is another big factor which could be a very big bonus for the markets. All this is expected to take the markets up in the long run. Analysts expect Nifty — currently at 8,200 levels — to move up to 8,800 levels in the next few months which means a growth of about 10%. “What can further propel this rally is the good monsoon that the nation awaits anxiously,” adds Gupta.