![]() With the Covid-19 crisis, this discrepancy has become even more prominent. Recently, however, concern has been raised regarding the disconnect between the real economy and the stock markets in India. ![]() Similarly, research suggests that fluctuations in macroeconomic factors influence stock market returns. Evidence from the past downturns such as the Great Depression, Japan’s ‘lost decade’ and the Global Financial Crisis of 2008 (GFC) finds that stock market bubbles and crashes stimulate macroeconomic upheavals. ![]() Stock markets have often been used as a barometer of the macroeconomy, with stock market surges representing a booming economy and market crashes heralding an economic downturn. The downslide in the markets as the SENSEX lost 1500 points this morning suggests their warning is both timely and serious. However, analysing historical trends and current data together, Simtiha Ishaq Mir and Younis Ahmed Ghulam warn that the stock market is out of sync with the real state of the economy and that the government needs to take urgent steps to avoid an uncontrolled and catastrophic bursting of this bubble. The Covid-19 pandemic has created economic conditions that are keeping the stock markets high in India.
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