In its annual report, the Reserve Bank of India (RBI) cautioned investors about the sharp rise in stock prices at a time when the economy was contracting. The Nifty50 rose 70.9 per cent, the Nifty Midcap 150 by 100 per cent, and the Nifty Smallcap 250 by 117.2 per cent during financial year 2020-21 (FY21).
The gross domestic product (GDP) contracted by 7.3 per cent during this period. Should you worry? Valuations are above long-term averages at present (see table). “It’s the result of years of quantitative easing and easy monetary policies that have led to the injection ...
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