India's main stock index has soared to unprecedented levels as investors bet that corporate earnings in Asia's third-largest economy will improve amid rapid vaccination and an easing of the epidemic.
The S & P BSE Sensex broke through the 60000 mark for the first time on Friday, while the NSE Nifty 50 index approached the 18000 mark. The Sensex index has more than doubled from its March 2020 low, making it one of the best-performing stock indices in major markets.
The stock market soared as the central bank's record-low interest rates reduced returns on traditional savings channels such as bank deposits, fuelling a surge in the stock market as millions of new investors were willing to buy riskier assets. Global funds have also taken advantage of the wind, putting nearly $9 billion into the Indian stock market this year and $1.8 billion into the Indonesian stock market and withdrawing money from countries such as South Korea and Malaysia.
New infections in India have remained stable since about July, with most cases coming from two states. In addition, the pace of vaccination has accelerated, with nearly 45 per cent of people in the world's second most populous country receiving at least one dose and 15 per cent fully vaccinated.
Most Indian states have lifted blockades, and corporate demand and profit prospects have improved ahead of the critical holiday season, which begins next month. Earnings of India's top 50 companies are expected to grow by 27% this fiscal year.
The strong rise in the Indian stock market has made valuations a hot spot again, and the focus of the debate is how far the Indian stock market can go. Nifty currently trades at a price-to-earnings ratio of nearly 23 times earnings, much higher than the five-year average of about 18 times, and much higher than Morgan Stanley.The Capital International emerging Markets Index (MSCI Emerging Market Index) trades at 13 times earnings.