Know in less than 7 minutes: Why is the economy shrinking and the market zooming?

On one hand, the Indian economy has shrunk due to the COVID-19-induced lockdown, on the other hand the market is surging. This phenomenon had left many investors baffled but it is nothing to worry about.

There is a rise mainly because markets have always been forward-looking and GDP data or economy has been a reflection of the past. Besides this, the surplus liquidity before reaching the right destination usually moves from the capital market to other areas. With all central banks including the Reserve Bank of India (RBI) introducing initiatives to increase liquidity, this ought to happen.

In a short video, which is less than seven minutes, veteran journalist and executive editor of CNBCTV18, Latha Venkatesh explains what is the cause of the rise in the market while the economy takes a beating.

While the market is not the only benefactor of liquidity in the system, gold is also a benefactor. The yellow metal has seen investors rush towards it to diversify their portfolio.

This video also received some twitter users countering claims. But many shared a positive feedback on this analysis.

On Tuesday as well, domestic indices found firmer ground as investors poured money into the banking and finance sector amid a positive trend in global markets. The 30-share BSE Sensex overcame bouts of volatility to end 287.72 points or 0.74 per cent higher at 39,044.35. The broader NSE Nifty rose 81.75 points or 0.71 per cent to finish at 11,521.80.

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