India Economy Watch - Explaining The Divergence Between The Economy, Equity Markets: Motilal Oswal
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Motilal Oswal Report
It is now commonplace to highlight the divergent trends between the record-high equity markets and declining to marginal growth in economic activity.
In this note, we argue that such divergent trends should not be surprising, considering that the former is entirely linked with the performance of listed companies, while the latter has a much broader scope.
The strong performance of the equity market is a reflection of the fact that the gross value-added of the listed non-financial companies grew ~14% YoY in H2 CY20 and 36% YoY in Q1 CY21.
The GVA of the rest of the economy, however, shrank ~2% YoY in H2 CY20 and grew 6.7% (slower than the pre-Covid-19 trend) in Q1 CY21.
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