The Wealth Effect of India’s Stock-Market Boom

• On 23 July, Finance Minister Nirmala Sitharaman announced higher taxes on stock gains, causing a brief market crash that quickly recovered.
• The Indian stock market has tripled since April 2020, driven by individual investors who are now experiencing a 'wealth effect' and increased spending.
• A survey by The Ken reveals that one in five investors has seen their spending outpace their income due to market gains, leading to a rise in luxury purchases and experiences.
• Confidence among investors is high, with many planning for early retirement and shifting investments from fixed deposits to equities.
• Despite the optimism, some investors are cautious, fearing a market correction due to the disconnect between stock prices and economic fundamentals.

Source: The Ken