Sustainable Growth or Bubble? What Sets the Current Equity Rally Apart from the Pre-Covid Rally?

Posted On Friday, Aug 04, 2023

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The Indian equity market has witnessed several upswings in recent years, but the current rally is particularly noteworthy for its strength and breadth. Though momentarily Fitch’s downgrade of US credit rating may have led to a ripple effect in the India Equity Market causing the Sensex to slide downwards, the long term growth prospects look intact. There are a number of factors that have contributed to this rally. Explore what they are and how are they different from the equity rally before the pandemic struck between 2013-2018.

FactorFY 2013-18 RallyCurrent Rally FY 2021-24
Inflation rate5.4%4.6%
EPS growth rate17.46%13.6%
PE ratio20.2125.26
GDP growth rate7.2%8.3%
Underlying economic conditionsWeakened economic growth due to IL&FS crisis, macroeconomic shocks such as GST implementation- demonetizationStrong corporate earnings, rising exports, continued economic growth
Composition of the rallyConcentrated in certain sectors such as ITBroad-based – across sectors
Role of foreign investorsMajor role – sentiment in favour of India’s prospectsReduced due to strong DII flows

Source: World Bank, MOPSI, BSE Data

It is important to note that the factors noted above are just averages, and there can be significant variation within each period. For example, the GDP growth in 2016 was only 6.7%, while the inflation in 2018 was 5.4%.

The current rally is positively different from the previous rally in the 2013-18 period in a number of ways.

  1. Stronger economic growth: India's economy is growing at a healthy pace that is more broad-based with several sectors of the market participating including IT, pharma, consumer discretionary, and financials.
  2. FPI inflows makes a comeback: Foreign investors, who were on a selling spree and exited Indian equities for nearly 2 years have made a comeback and have been investing money to the tune of $33.4 billion into Indian stocks in FY 2023-24.
  3. Robust earnings growth: Unlike the previous rally, EPS growth rate is broad based at 15.40% YTD 2023-24.
  4. Policy reforms: Rise of digital India, and the government's pro-business policies in recent years, which has made India a more attractive destination for foreign investment.
  5. Elevated inflation: Though inflation was higher in FY 23,  it is now within the RBI target of under 6%.
  6. India’s Equity Markets surpasses EMs - Weak growth and uncertainty about government policies in China has increased the relative attractiveness of Indian market for FPIs. India’s economic resilience and policy stability compared to other EMs will continue to attract FII flows in the medium term.

In contrast, the rally between 2013 and 2018 was largely driven by foreign investment. The period was characterized by several macroeconomic shocks. The IL&FS crisis was a major financial crisis that affected India's infrastructure sector. Similarly, Demonetization & GST implementation also led to a slowdown in economic growth which weighed on the stock market, increasing volatility.

Only time will tell how long the current rally will last, but it is clear that the current rally is comparatively more sustainable, being driven by a combination of factors, including strong economic fundamentals & corporate earnings, inflows of foreign capital, rising exports and rising valuations.

However, investors should be aware of the risks, such as rising food inflation and global interest rate environment, which could weigh on the market in the future. Markets have become expensive as valuation has run up higher than historical averages. You should be careful about investing in certain pockets such as mid & small caps which have run-up considerably.

The Equity Funds of Quantum are tuned to India’s cyclical recovery and have delivered promising returns over the long run – outpacing benchmark on a since inception basis.

  • Quantum India ESG Equity Fund delivered returns of 17.24% CAGR outperforming its benchmark (15.81%) & BSE Sensex TRI (15.65%).
  • Quantum Long Term Equity Value Fund delivered returns of 13.58% CAGR vs benchmark S&P BSE 500 (12.57%) & S&P BSE Sensex (12.64%)**

Therefore, a sensible strategy would be to invest in well-diversified portfolio across market caps, sectors and investing styles using the above equity funds. Start building your equity basket using Quantum’s tried and tested 12|20:80 Asset Allocation Strategy.  Visit the Asset Allocation Calculator to know best how to go about building this diversified portfolio using Quantum Mutual Funds.

Overall, the Indian equity market is in a strong position, and the current rally may likely continue for some time. Stay invested or add more to your equity portfolio by building a diversified equity portfolio with a long term perspective.


**The above performance to be read in conjunction with the complete fund performance below.

Performance of the SchemeDirect Plan
Quantum Long Term Equity Value Fund - Direct Plan - Growth Option
 Current Value ₹10,000 Invested at the beginning of a given period
PeriodScheme Returns (%)Tier 1 - Benchmark # Returns (%)Tier 2 - Benchmark ## Returns (%)Additional Benchmark ### Returns (%)Scheme Returns(₹)Tier 1 - Benchmark # Returns (Rs.)Tier 2 - Benchmark ## Returns (Rs.)Additional Benchmark ### Returns (Rs.)
Since Inception (13th Mar 2006)13.58%12.57%12.64%12.54%91,65078,49179,36478,073
July 31, 2013 to July 31, 2023 (10 years)14.58%15.98%15.69%14.60%39,01744,08442,99539,099
July 29, 2016 to July 31, 2023 (7 years)11.03%14.29%14.20%14.47%20,82525,50525,35725,787
July 31, 2018 to July 31, 2023 (5 years)11.24%13.49%13.38%13.42%17,03518,83718,74318,773
July 31, 2020 to July 31, 2023 (3 years)24.35%25.15%24.13%22.38%19,23019,60219,12518,329
July 29, 2022 to July 31, 2023 (1 year)18.65%17.31%16.09%16.93%11,87611,74111,61811,703

Data as on July 31, 2023.
# S&P BSE 500 TRI ## S&P BSE 200 TRI ### S&P BSE Sensex TRI. Past performance may or may not be sustained in the future.
Load is not taken into consideration in Scheme returns calculation.
Different Plans shall have a different expense structure. Returns are net of total expenses and are calculated on the basis of Compounded Annualized Growth Rate (CAGR).
#with effect from December 01, 2021 Tier I benchmark has been updated as S&P BSE 500 TRI.
As TRI data is not available since inception of the scheme, benchmark performance is calculated using composite CAGR S&P BSE 500 index PRI Value from March 13, 2006 to July 31, 2006 and TRI Value since August 1, 2006. ##TRI data is not available since inception of the scheme, Tier II benchmark performance is calculated using composite CAGR S&P BSE 200 index PRI Value from March 13, 2006 to July 31, 2006 and TRI Value since August 1, 2006.
The Scheme is co-managed by Mr. George Thomas & Mr. Christy Mathai. Mr. George Thomas is the Fund Manager managing the scheme since April 1, 2022. Mr. Christy Mathai is the Fund Manager managing the scheme since November 23, 2022. For other Schemes Managed by Mr. George Thomas & Mr. Christy Mathai please click here

Performance of the SchemeDirect Plan
Quantum India ESG Equity Fund - Direct Plan
 Current Value ₹10,000 Invested at the beginning of a given period
PeriodScheme Returns (%)Tier 1 - Benchmark# Returns (%)Additional Benchmark Returns (%)##Scheme (₹)Tier 1 - Benchmark# Returns (₹)Additional Benchmark Returns (₹)##
Since Inception (12th Jul 2019)17.24%15.81%15.64%19,07018,13918,036
July 31, 2020 to July 31, 2023 (3 years)22.52%20.82%22.38%18,39017,63718,329
July 29, 2022 to July 31, 2023 (1 year)15.69%10.04%16.93%11,57911,00911,703

Data as on July 31, 2023.
#NIFTY100 ESG TRI, ##S&P BSE Sensex TRI. Past performance may or may not be sustained in the future.
Load is not taken into consideration in Scheme returns calculation. Returns are net of total expenses and are calculated on the basis of Compounded Annualized Growth Rate (CAGR).
The Scheme is managed by Mr. Chirag Mehta and Ms. Sneha Joshi. Mr. Chirag Mehta is the Fund Manager and Ms. Sneha Joshi is the Associate Fund Manager managing the scheme since July 12, 2019.
For other Schemes Managed by Mr. Chirag Mehta please click here.



Product Labeling
Name of the SchemeThis product is suitable for investors who are seeking*Riskometer of schemeRiskometer of Tier I BenchmarkRiskometer of Tier II scheme

Quantum Long Term Equity Value Fund

An Open Ended Equity Scheme following a Value Investment Strategy.

Primary Benchmark: S&P BSE 500 TRI

• Long term capital appreciation

• Invests primarily in equity and equity related securities of companies in S&P BSE 200 index


Investors understand that their principal will be at Very High Risk

Name of the SchemeThis product is suitable for investors who are seeking*Riskometer of schemeRiskometer of Benchmark 

Quantum India ESG Equity Fund

An Open ended equity scheme investing in companies following Environment, Social and Governance (ESG) theme

Tier I Benchmark: NIFTY100 ESG TRI

• Long term capital appreciation

• Invests in shares of companies that meet Quantum's Environment, Social, Governance (ESG) criteria.


Investors understand that their principal will be at Very High Risk

*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.


Disclaimer, Statutory Details & Risk Factors:

The views expressed here in this article / video are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. Quantum AMC / Quantum Mutual Fund is not guaranteeing / offering / communicating any indicative yield on investments made in the scheme(s). The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The article has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of this article should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments.


Mutual fund investments are subject to market risks read all scheme related documents carefully.

Above article is authored by Quantum.

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