Poll result debacle: The stock market’s love for the BJP cost it dearly

livemint.com:

₹2,79,369 crore in Indian stocks, though they have net sold stocks April onwards. Indeed, domestic investors also turned to investing in stocks after covid. The number of demat accounts jumped from 39.4 million in December 2019 to 154.4 million in April 2024.

Further, domestic institutional investors (DIIs), which comprise mutual funds, insurance companies, provident funds, banks, etc, and who invest money collected from retail investors, invested a whopping ₹6,55,262 crore in stocks from April 2020 to 3 June 2024. From April 2024 to 3 June 2024, they have invested a net ₹1,01,833 crore. Also, the rise of smartphone investing apps, fuelled by cheap internet access, has led to higher retail interest.

Nonetheless, the larger point is that the number of new retail investors in stocks can’t keep rising at this fast pace. Also, interest rates are no longer low. So, what does the future hold? Stock prices ultimately are a reflection of the expected earnings of companies.

Data from the Centre for Monitoring Indian Economy shows that in 2023-24, the net sales of around 4,800 listed firms rose 6% from 2022-23, considerably lower than the jump in 2022-23 and 2021-22. However, growth in net profit has stayed robust, thanks to expenditure rising at a slower pace than sales. In fact, in 2023-24, the net sales of more than 3,700 listed non-financial services companies grew less than 1%.

So, sales seem to be catching up with the slowdown in private consumption expenditure of the economy. In 2023-24, it grew 8.5% (not adjusted for inflation), the slowest since 2004-05, other than the pandemic year of 2020-21. Consumption growth has slowed down primarily due to a lot of it being financed through household borrowings.