The Reserve Bank of India (RBI) recently warned in its 21st fiscal year report that there may be a stock market bubble. After the domestic stock market hit a record high, the central bank made comments. The collapse caused by the second wave of the Covid-19 pandemic. Anyone who has followed the national stock market in the past few months knows that despite the second wave of economic turmoil, the stock market’s performance has been impressive.
In the initial stage of the second wave, the benchmark S&P BSE Sensex and NSE Nifty50 began to rise again. On Friday, due to Sensex’s close to 52,000 real economic growth, Nifty50 closed at a record high, affected by the local blockade imposed by most states during the second wave. The second wave, if not as bad as the first wave.
In the context of RBI financial or economic markets, a bubble usually describes a situation where the price of a stock, financial asset, asset class, or an entire industry is significantly higher than its fundamental value. Market bubbles are often difficult to predict, especially for those who do not follow the market every day.
Stock market bubbles are usually related to rising stock prices, which are usually much higher than their value. The basic value of the company, including profits and assets. Bubbles can cover the entire stock market, exchange-traded funds (ETF), or stocks in specific industries. Right now, after the second wave of hesitation, the Indian stock market seems to be rising rapidly.
In this year, based on the development of the Covid-19 situation, market analysts can expect an optimistic assessment of the long-term development of the domestic stock market in India. This suggests that the stock market may remain optimistic unless it experiences an unprecedented shock, which may break the positive momentum and weaken confidence.