A few reasons may be:
1. India's GDP falling from 8.26% in (2016-2017) to contract by 7.3% (2020-2021). According to CMIE Report salaried jobs fell from 85 million ( pre covid level) to 74 million. over
97% of India's population becomes poorer compared to last year income to this year income.
2. The covid and lockdown have increased unemployment and its lead to a decline in income for the majority of workers and it leads to poverty. The stock market seems disconnected from
the economy. India and Vietnam were the top-performing markets in May 2021. Nse and Bse listed companies are only a part of the economy, and they are not the real economy. Listed companies will grow big and make profits but competitiveness is lowered and they are in a bargaining position because many small firms are hit hard by the pandemic. so they make big profits
3. The economy is likely to Recover slowly rather than experiencing the quick fall of GDP seen last year. The stock market reacts in advance at all time. If the economy is going to down, the market will first react quickly and fell, if the economy is going to up, the market will go up before the economy retrieves.
4 . Due to work from home companies saved expenses on staff, rent, Electricity bill, canteen costs and rent. so the Profit after tax and cash flows are better than ever. According to Business Standard, the net profit of listed companies to GDP ratio surged to a ten year high of 2.63%. Most of the corporate results for 2020-2021 was an all-time high, and bulk profits came from cost cut down. But cost cut down is good for corporates and it is not good for the overall economy. Small firms are facing hard times in lockdown and they are winding up because working capital is running out. India is in danger of becoming a rich country with lots of poor people.
5.In India, families are helping to come out from calamities, an uncle gives job and cousin helps for monthly expenses. Most of the families pay their monthly bills by gold.
Mananpuram gold loan auctions of Rs. 404 crore to recover money is showing the real economy. People's income reduced, to come out from this crisis they are selling
their assets borrowing from relatives and money lenders.
6. Average per capita income is also a major concern. In India sometimes the average per capita income increased by few wealthy people. per capita income is an indicator of the standard of living in the country. India has slipped below Bangladesh in per capita income. The unorganized sector is the worst affected, but then who cares about them. Many people who never used to order groceries and other things online was forced to do the same due to the lockdown and now most of them continue to buy online as it is convenient
7. Another reason for the index price is driven by huge money inflows by FII and FPI investments as per the RBI annual report. Also nifty touched an all-time high instead of a warning given by RBI of a stock market bubble. The end of covid and nifty hitting all-time high doesn't mean all are going well. we have to seriously look into unemployment.
Finally yes, the stock market is disconnected from the Indian economy. The government have to take some of the measures like easing the cost of doing business for small firms and
providing financial support by giving loans without interest to unorganized sectors, right allocation of resources. The job-creating MSME is in distress and being dominated by larger firms that have better capital. Hope both larger and smaller firms will travel together in future. If we fix these issues stock market will react based on the real economy.
