NSE market cap to Money Supply stands at 1.07.

Insight: There has been a run up in both equity markets and Money supply in the past few months. A run in Money supply is expected to reflect in asset reflation, especially in equities. At current, the ratio is at 1.07, implying that the equity market cap is now greater than Money supply (M3). The ratio higher than long-term average of 0.87 and is also above the 2017 bull run average of 1.05. The Budget at the start of February is likely to keep the markets volatile going forward. Caution is warranted as we may see a correction in equities post budget.

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