The stock market rally all over the world just after the Covid-19 pandemic rattled the world was actually quite surprising for most people. After the March 2020 market crash, all major indices like Sensex, Nifty, NASDAQ, Dow Jones, S&P 500, DAX etc. saw a V-shaped recovery and went on to hit all time highs for the next one and a half years.
Well, there were several reasons behind this unprecedented market rally —

Surplus liquidity — Due to the lockdowns a lot of people lost their job and small businesses suffered. So, the US and other major central banks ‘printed’ a lot of money. Govts transferred that money to people as direct benefit to aid them during the lockdowns. The central banks also lowered the interest rates to stimulate economic activity. It is called quantitative easing.

This quantitative easing brought huge liquidity to the economy. And the people who already had enough money had a lot of surplus in their hands and they invested all that money in the stock markets.

Organised players got stronger — During the nationwide lockdowns, the weak and unorganised small businesses were run out of funds and thus left out of business. The larger organised companies gained market share from those smaller players. Their sales, margins and profits grew sharply.

And the stock market does not represent the entire economy, but only the organised section of the economy. So, it’s very natural that the market will be happy and booming for those growing profits of the big companies.

The IT boom — When almost the entire world was reeling under lockdowns during the peak of the pandemic, the experts were of the opinion that Covid-19 would remain there for several years. So, the only feasible way for people to continue studies, works, meetings and shopping (and what not) was online.

All businesses were trying to go online overnight. So, the order books of the IT service companies were swelling, making their revenue and profits jump. So, shares of these IT companies skyrocketed. This also pushed the indices higher.

Less employee expense — It was during the Covid-19 pandemic that the companies understood how the works can be done even with less workforce and how most of the work can be done from home. This led to cost-cutting tactics from companies which directly helped their margins grow. As a result, the profits of the companies also surged stimulating the markets go higher.

These are the reasons behind the stock-market rally during 2020-2021 even after the Covid-19 hit the world hard.