Disconnect between the stock market and economy in India

Abstract

The spread of COVID-19 pandemic has had unprecedented impacts on both social and economic aspects of our lives. The crisis has impacted both supply and demand sides. The Indian economy which had already been falling since Q4 2018, witnessed a contraction of 23.9% in Q2 2020, which is the worst since 1996, which is when India started collating quarterly GDP data. Yet Indian equity indices have surpassed their pre-pandemic highs, albeit after taking a plunge in March 2020. We have attempted to analyse this disconnect with the help of a survey about people’s beliefs regarding investing in stock market and the economic state in the current pandemic situation.