Soaring Stock Market Indices & Feeble Economy
A surge in the stock market occurs when the demand for financial securities exceeds their supply (somewhat in the manner of fish markets). Unlike fish though, which are not easily storable, securities represent a variety of ownership rights over existing durable assets held by firms and used for their day-to-day operations. Purchase and sale of financial securities represent changes in ownership of already existing physical assets and not the creation of new equipment to increase productive capacity, employment and economic growth. So what affected the Indian Economy and Stock Market that even when economy was trumbling the Stock market Indices were Making New Highs. To understand this conundrum lets dial back a few months back to May 2019. Everybody thought that a struggling economy would dent Prime Minister Modi 2014 mandate but he shocked the whole world by improving upon his tally by crossing a breathtaking 300 seats in 2019 Lok Sabha election.The market broke into euphoric d...