Rally had sustained through 2020 and the second wave and was “not a blip”.FM Nirmala Sitharaman
Published On: Wednesday, August 18, 2021 | By: Team KnowMyStock
Finance minister Nirmala Sitharaman does not agree with the sentiment that there is a disconnect between the stock market's current run and the real economy. She said the rally had sustained through 2020 and the second wave and was “not a blip”. “Stretched valuations of financial assets pose risks to financial stability. Banks and financial intermediaries need to be cognisant of these risks and spillovers in an interconnected financial system,” wrote Reserve Bank Governor Shaktikanta Das in the Financial Stability Report earlier this year.
“Economic research on stock markets clearly highlights that a key indicator of stock market indices being overvalued is high volatility in the stock markets. In this context, it is noted that stock market volatility as represented by India-VIX index has reduced considerably since March 2020," said the FM.
Abundant liquidity across the globe has led to investors reaching for higher returns, stretching the disconnect between financial markets and real sector activity.
Tags: Finance minister Nirmala Sitharaman stock market's current run and the real economy Abundant liquidity
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