Sensex delivers a hit 2021, scales 50K for 1st time
New Delhi: As if wanting to be an antidote to the Coronavirus pandemic, the Indian stock market adorned carnival robes in 2021 with a tsunami of liquidity unleashed by global central banks coupled with supportive domestic policies and the world's largest vaccination drive sparking off a world-beating rally on Dalal Street, despite bouts of uneasiness over fizzy valuations.
While the wider economy shuttled between recovery and relapse, dictated by multiple mutations of the virus, equity market benchmarks appeared headed in just one direction -- skywards. The dizzying upward journey has added a whopping Rs 72 lakh crore during 2021 to investors' wealth, measured as the cumulative value of all listed shares in the country, taking it to nearly Rs 260 lakh crore.
The BSE Sensex made history this year by breaching the 50,000-mark for the first time ever, and went on to scale the 60,000 level within the next seven months. It closed at its lifetime high of 61,765.59 on October 18. Despite the year-end gyrations due to the Omicron threat, the 30-share benchmark has posted returns of nearly 20 per cent so far this year, eclipsing most of its global peers.
However, Sensex is also the most expensive large market in the world, trading at a price-to-earnings ratio of 27.11.
This means investors are paying Rs 27.11 for every rupee of future earnings of the 30 Sensex firms, compared to its previous 20-year average of 19.80. But, the Indian market is not the only one witnessing such exuberance.
Global central banks, led by the US Federal Reserve, have pumped in trillions of dollars into the financial markets since the onset of the pandemic to boost liquidity and prop up growth. The US Fed has been buying bonds worth $120 billion every month for the past one-and-a-half years, nearly doubling its balance sheet to an astounding $8.3 trillion.
This unprecedented sea of liquidity has induced what experts have termed the 'everything bubble' - an across-the-board increase in asset prices, be it stocks, real estate or commodities, not to mention more exotic instruments like crypto-currencies and non-fungible tokens (NFTs). Back home, the government and the RBI worked in tandem to reignite the animal spirit of the pandemic-battered economy.
