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Roller-coaster: large-scale FY21 market rally; benchmarks return more than 60%

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The BSE Midcap and BSE Smallcap rose 85.85% and 108.79% during the year, while the BSE500 rose 72.11%.

By Urvashi Valecha

The outgoing fiscal year has been nothing short of a roller coaster ride for Indian stocks, which rebounded from the stock market crash in late March 2020 amid fears over the economic impact of the Covid-19 pandemic.

Benchmarks returned over 60% in FY21. The Sensex and Nifty grew 64.38% and 66.61%, respectively, in FY21, largely due to foreign portfolio flows of $ 37.48 billion that were invested in the Indian actions.

The rally of FY21 was broader and not limited to a few large stocks. After underperforming for two years, the larger markets not only participated in the rally, but even outperformed benchmarks.

The BSE Midcap and BSE Smallcap rose 85.85% and 108.79% during the year, while the BSE500 rose 72.11%.

The strong market recovery, experts say, was driven by ease of liquidity and expectations of an economic recovery.

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Going forward, markets would react to global bond yields and rising Covid-19 cases. G Chokkalingam, Chief Investment Officer, Equinomics Research and Advisory, said: “We all know that the recovery and expected recovery in economic activity has contributed to the meteoric recovery of FY21.

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However, the most important factors that would decide the recovery of FY22 are the rise in bond yields globally, the resurgence of Covid-19 cases which would again impact the economy and the monsoons. . More importantly, the magnitude of the economic recovery which is expected to be at least 400 basis points higher than the decline we saw in fiscal year 21 ″.

In the last week of March 2021, investors scrapped their shares after the surge in Covid-19 cases in India and other countries made market participants wary of the economic impact it would have. The sale by foreign portfolio investors of $ 623.3 million in the past three trading sessions also hurt markets. Both Nifty and Sensex sold off and ended the week down 1.6% and 1.7%.

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However, at Friday’s close, markets rallied and rose with the Sensex rally 568.38 points (1.17%) to close at 49,008.5 and Nifty rallied 182.4 points (1 , 27%) to close at 14,507.3 on improving global indices and ahead of the season domestic results. , which will begin in April. Market experts believe that as long as the economy grows, inflation and bond yields would not be of great concern.

Hiren Ved, Director, CEO and CIO of Alchemy Capital Management, said, “As long as growth increases, you don’t have to worry about inflation and returns. In the current context, whether in the United States or in India, we do not have a situation where inflation is increasing but not growth.

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We are on the cusp of a history of phenomenal growth, which will be longer and higher than what we saw in 2003-2007. So many factors have combined in favor of growth, whether it is China plus one, global and national fiscal and monetary policies are favorable, as is the geopolitical situation ”.

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Despite the risks associated with the current market recovery, market experts remain bullish on the equity markets. Hemang Jani, Head of Equity Strategy, Brokerage and Distribution at Motilal Oswal Financial Services, said: “The current volatility is caused by the rise in Covid-19 cases, but the earnings picture for the next fiscal year appears very solid and central banks will remain accommodating. There is no case for a significant rise in bond yields. We therefore remain optimistic on the markets ”.

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