Indian stocks logged the sixth straight year of gains in 2021, but analysts expect equity markets to enter a choppy phase with inflation, monetary policy normalization and the Omicron strain weighing on sentiment in 2022.
The stock indices fell by 10 per cent from their peak in October, but analysts said the current valuation will not bring excitement to the investors considering the rising Omicron cases that are tunring the market unpredictable.
Though the equity market could be volatile in the coming months in the wak of the rising Omiocron/Covid cases in India, but the corporate earnings, economic data and the Union budget may provide some positive surprises in the long run.
Check what analysts are saying:
Dhiraj Relli, managing director and chief executive officer, HDFC Securities
Relli was quoted by Mint as saying, “Indian equities are running into many challenges, including the US rate cycle, rising oil prices, elections in key states, a potential covid third wave, the upward inflexion in domestic interest rates, rich headline valuations and strong relative trailing performance.”
Interestingly, despite many challenges, benchmark indices Sensex and Nifty gained 22 per cent and 24 per cent, respectively, in 2021. This is their best performance since 2017 when both indices gained 28 per cent.
Vinod Nair, head of research, Geojit Financial Services
Nair told Mint India outperformed most global peers in 2021, supported by robust retail participation, economic recovery, vaccine coverage and a rising appetite for Indian goods and services.
“Despite lingering fears surrounding surging Omicron cases, the domestic market is expected to be resilient, supported by healthy long-term growth forecasts and economic reforms," said Nair.
Naveen Kulkarni, chief investment officer, Axis Securities, 2021
“2022 will be a little more volatile but will still be very good for equity investors in India. 2022 is very likely to be another year of good double-digit returns and continued wealth creation. Autos, banks, and capital goods, literally the ABC of equity markets, will be the most interesting sectors for 2022,” reporting Mint, citing Kulkarni.
Here are some other key details, as per the report publihsed in Mint.
In 2020, Sensex and Nifty jumped 15-16 per cent in a year when equities had crashed over 20 per cent due to nationwide lockdowns following the covid outbreak. In dollar terms, Sensex rose 20 per cent, and Nifty surged 22 per cent in 2021, outpacing the MSCI EM index (down 5 per cent) and MSCI World, which rose 20 per cent, a report published in Mint said.
However, members of the BSE Midcap and BSE Smallcap indices stole the show in 2021, gaining 39 per cent and 63 per cent, respectively. The total market capitalization of Indian stocks rose to $3.42 trillion at the end of December from $2.52 trillion at the end of the previous year.
India, which ranks seventh in the league of top 10 world markets, accounted for 2.83 per cent of the world market cap of $121.17 trillion. In the same period in 2020, India contributed 2.44 per cent to the world’s total market capitalization.
Institutional flow and retail investors euphoria led the super rally in stock markets during the year.
Foreign institutional investment inflows into Indian equities were at $3.86 billion in 2021, with a net sell-off of $4.70 billion in October-December. Meanwhile, the growing participation of retail investors emerged as a stabilizing factor for the markets, with a record number of Demat accounts opened in 2021. As many as 27.44 million demat accounts were created from January to November in 2021.
In contrast, 10.5 million demat accounts were opened in 2020, the year when retail investor participation in equity markets began to swell, a report in Mint further added.
As of November, India’s total demat accounts stood at 77.24 million, compared to 49.8 million at the end of 2020 and 39.3 million in 2019. A demat account is opened by an investor with a depository participant to invest in securities such as stocks and bonds.
The securities are held in a digital format. Indian companies raised Rs 1.18 trillion through IPOs in 2021, compared to Rs 26,612.61 crore in the previous year and Rs 12,361.55 crore in 2019. A total of 63 IPOs hit the primary markets in 2021, while there were 15 and 16 in the previous two years.