The liquidity-based rally in the stock markets will cool next year

MUMBAI: Liquidity-based rallies in the country's stock markets are expected to cool down next year. As global and domestic monetary policy begins to tighten, stock market rallies will take a break, a survey report said. The report also noted an increase in corporate revenue.

Since the onset of the epidemic, the RBI has cut the repo rate by 114 basis points so far and the current repo rate is 8.00 per cent. In addition to the repo rate cut, the RBI has poured a lot of liquidity into the financial system. It is because of this excess liquidity that the current rally in Indian stock markets is being witnessed.

Given that the stimulus provided by the RBI is expected to continue till the end of this year, stock market analysts are expecting the Sensex to grow by 3.50 per cent from its current level by the end of 2021.

The expected 12 per cent growth in the Sensex this year will be the biggest since 2015. However, the Sensex is projected to rise by only 2.50 per cent in 206, the lowest growth in three years, the report quoted an analyst as saying.

In addition, Corona's third wave could pose a risk to the economy's recovery. In addition, the effect of the decision to increase interest rates by various central banks will be seen. For the past two years, inflation has been above the Reserve Bank's target of four per cent. However, the RBI has maintained a mild policy to prioritize growth in the Corona era.

The US Federal Reserve, on the other hand, will soon begin phasing out its ૨ 150 billion bond-buying program, which could also put a damper on market rallies, another foreign analyst said.

Indian companies have performed well in the June quarter of this year due to last year's lows. However, earnings growth continued to decline in the current quarter.

Meanwhile, according to a Bank of America report, the Nifty 30 is expected to see a correction of 10 per cent from its current level by the end of December.