2020 MARKET ENDS – AT LEAST IN THE POSITIVE!

Whew! 2020 is on its way out. Literally hobbling out.

This is a year we all want to forget as quickly as possible, probably one of the toughest years for mankind in recent times. 2020 calendar year for the stock market has ended and what a year of roller coaster ride it has been!

The Sensex not only crossed 45k but today ended the year above 47k, while in 2018, the milestone was 41k and 38k in 2017.The biggest single year jump was in 2009 and then in 2017. Given the pandemic, 2020 coming in third best is no small feat.

Tumultuous, ecstatic, euphoric, down right depressing, lackluster, listless – we saw all the mood swings. But it ends well and that’s all that matters! And the theme throughout the year remained bullish with great doses of optimism; despite the pandemic and economy and falling growth rate, nothing deterred this upbeat mood.

Right from 2005, the market has always ended the year in the positive except thrice – 2008, 2011 and 2015. In the years 2008 and 2011, sentiments were at rock bottom but currently, we are nowhere near that kind of pessimistic outlook; in fact things should get better from here! That’s the hope we all have – with vaccination on the horizon, despite the new variant, the hope is that by mid-2020, we will be out of the Covid crisis.

Notwithstanding global and domestic economic uncertainty at the moment, the Indian markets have decided to concentrate on ‘local’ facts which, in 2021 for the first half of the year will be all about the vaccination first and then Budget, the “shape” of the bounce back. No doubt currently sentiments are extremely hopeful and expectations are high that the Govt will welcome the New Year with some big bang, bold, reforms. We have gone through a gargantuan experience in 2020 and the hope is that the Govt will compensate us honest tax payers for the trouble we have gone through in the ensuing Budget and usher in some growth, jobs creation through infra build. That’s the least they can do in a year where focus should be on lifting up the spirits of the people and the economy.

And that in turn means that 2020 most certainly, from today’s vantage viewpoint, looks very optimistic. Now that’s a good note to end a year on!

Three things make a market – earnings, valuation and sentiments. Yes, earnings were up thanks to the tax cuts but rising commodity prices could start putting some pressure on the margins. Yet, the market is taking this as a legacy of the past and to some extent, has already discounted the expected lukewarm performances.

Sentiments? Well, it is much better today than where it was mid-year. Looking ahead into 2021, the first half will be volatile with similar ups and downs. For now, crude oil is expected to behave and that, to some extent will provide some succor. But the entire mood of the market depends on the Budget and what measures the Govt takes to help improve the economy. If the auto sector continues to post improvements, even if slight,  we can be certain that market sentiments and reality will finally be in sync. So if in 2020, it was the pandemic which moved the markets, then 2021 has to be essentially about economics – that is the pulse of the market.  

And that leaves us with valuations. This has become a moving target. Most of the A-grade stocks or blue chips as we call them and quality mid-cap stocks have run way ahead of their fundamental valuations. But analysts say that today, that benchmark alone will not do. With value of rupee going down – we are able to buy lesser things with the same Rs.100. This in turn means that stocks too cannot be valued only on the basis on PE. Yet, what is certain is that some stocks which are at over 100 PE, will give you lesser returns compared to a mid-cap or small cap quality stock. So you will get your value for money only in these mid/small cap stocks. So, the hunt for such “penny” stocks will continue into 2021 too.

2020 has been a terrible year and that makes us hope all the more fervently that 2021 will be much better. Keep the cheer and keep the hopes up. Every year, despite the circumstances, market ends in the green.  And the first day of every New Year, it’s usually a slow day what with all the partying (at home) the night before!

2020 ended well and let’s keep the hope alive that 2021 will end on another historic high. Did someone say 50k?