There is bubble in stocks; two-way price movements likely from here: RBI

RBI‘s annual report released on Thursday suggested that the rally in domestic stocks despite an estimated 8 per cent contraction in FY21 GDP poses the risk of a bubble.

In a study “Is the Bubble in Stock Markets Rational?”, RBI said the widening gap between stretched asset prices relative to prospects for recovery in real economic activity has emerged as a global policy concern, while suggesting the need to consider a calibrated unwinding of stimulus once the pandemic waves are flattened and the real economy is firmly on a recovery path.

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