India's liquidity-driven stock market rally to dry out next year

Ultra-easy monetary policy from the Reserve Bank of India was the primary domestic driver of that rally

India's liquidity-driven stock market rally is expected to cool next year as global and domestic monetary policy starts to tighten, according to a Reuters poll of analysts who expect corporate earnings to rise further.

Despite slumps during two damaging waves of the COVID-19 pandemic, the benchmark BSE Sensex Index has surged nearly 120% from a record low of 25,638.9 hit in late March last year, when the country's first lockdown started.

Ultra-easy monetary policy from the Reserve Bank of India, which has slashed its repo rate by 115 basis points to 4.0% since the start of the pandemic and injected