Stock market levels pose risk of a bubble says RBI know why varpat

RBI

RBI

In a report released on Thursday, the RBI said that despite the forecast of an eight percent fall in the country’s gross domestic product (GDP) in 2020-21, a strong growth in the domestic stock markets poses a risk of bubbles.

New Delhi. The Reserve Bank of India (RBI) has been fearing the end of the boom in the share market amid the forecast of the decline in the economy. In a report released on Thursday, the RBI said that despite the forecast of an eight percent fall in the country’s gross domestic product (GDP) in 2020-21, a strong growth in the domestic stock markets poses a risk of bubbles. Learn what RBI said? RBI said that share prices in the country have reached record highs. The benchmark index crossed the level of 50,000 points on 21 January 2021, reaching a high of 52,154 points on 15 February. At the same time, the Sensex has increased by about 68 percent in 2020-21. In such a situation, this situation of inflation of property value is creating a situation of risk, given the estimate of 8 percent fall in GDP in the year 2020-21. Also read- RBI announcement: 2000 rupee note will not be available now, this currency came in the market after demonetisationEquity risk premium decreased The central bank said that the stock markets are mainly driven by currency expansion and foreign portfolio investors (FPI) investments. At the same time, the economic prospects also contribute to the stock market’s movement, but their impact is less than the money supply and FPI. The central bank has said that the main reason for the increase in share prices from 2016 to 2020 has been the reduction in interest rates and equity risk premium. Along with this, the expectation of earning in the future has also contributed to this to a large extent.




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