Chief Economic Adviser Arvind Subramanian on Monday appealed to shareholders to invest cautiously in Indian stock markets, saying the boom in markets has to be monitored carefully.
"The broader point is that, as we have seen around the world, when asset prices go up very much they always tend to come back and so we have to be watchful. When we analyse asset prices, I think there are two dilemmas here, you can either make the mistake of saying, oh this time it is different and stock market prices are justified. That's one mistake you can make. Or, you can say no no, the cry of wolf traps. As interest rates will start rising, people who have been internationally saying this, have been proven wrong. Stay clear of both these traps," Subramanian said at a press conference after presenting the Economic Survey for 2017-18.
"The higher the prices go, I think our vigilance should increase correspondingly," he added.
Subramanian further elaborated on the boom in the Indian stock market.
"The important thing is to understand why it is happening and how it is happening, and how it is different from what is happening elsewhere in the world. The Indian stock market, this boom, is very different. It is very different because it reflects the high interest rates and second it reflects a massive portfolio reallocation by investors, households away from gold, financial savings, and real estate into stocks," Subramanian said when asked if the Indian stock market is a boom.
"The part of the reason as to why it has happened in India is because of the policy action. This makes the Indian stock market very interesting but also something we have to monitor very carefully, Subramanian said.
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