Equity investors are factoring in the improving corporate balance sheet along with the long-term impact of production-linked incentive scheme and the growth of housing sector despite the pressure on the economy from the Covid pandemic.

Benchmark index Nifty touched a fresh high of 15916 for the month ended June and is up around 12 per cent in calendar year 2021.

According to a market valuation report of Motilal Oswal, around 60 per cent of Nifty constituents are trading at a premium to their historical averages. There is also inflows from foreign institutional investors supporting the rise.

The rally in the market has been in contrast to the GDP growth projections for 2021-22 which has seen a downward revision by the RBI to 9.5 per cent from its earlier projection of 10.5 per cent.

“The market is ignoring short-term pain of Covid-19 related impacts on the economy for the longer gain,” Nilesh Shah, group president and managing director, Kotak Mahindra Asset Management Company Ltd, said at a CII event on Saturday.

“Corporate India has done extremely well over the last few years. They have made the balance sheet leaner and repaid debt,” said Pankaj Tibrewal, senior executive vice-president and fund manager (equity), Kotak Mahindra Asset Management Company Ltd.

According to market observers, the production-linked incentive scheme covering 13 sectors with an outlay of Rs 1.97 lakh crore for a five-year period has the potential to trigger private sector capital expenditure. Further, improving affordability in the housing sector could aid ancillary sectors such as cement, paints.

“We believe the PLI scheme will start adding about a percentage to India’s GDP from 2024-25 onwards,” Shah said.

“Housing interest rates are at an all-time low level. Over the next couple of years, we could see another percent added to India’s GDP through the housing sector,” said Shah.