about 26 days ago
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2021 is finally on its way out. It was better than the forgettable year of 2020 but the threat of the virus remains high and the country is once again on high alert. If 2020 was probably one of the toughest years for mankind in recent times, 2021 is about the spirit of the human endeavor.

For the stock market, 2021 has been one of the best years ever. The market ended the year on a positive note, up over 450 points despite the increasing omicron numbers. In 2020, the Sensex ended the year above 47k, while in 2018, the milestone was 41k and 38k in 2017. But the jump between 2020 and 2021 is the best as the Senxes this year scaled 60k while last year were looking at 50k target.

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; 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-2022, 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 2022 for the first half of the year will be all about the vaccination + booster 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 2021 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 202m2 ost 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 started 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 2022, 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. The entire mood of the market depends on the Budget and what measures the Govt takes to help improve the economy. But the make-or-break will the US Fed – once it starts hiking rates, we are sure to see a knee-jerk reaction and March through May will be pretty volatile.

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. Thus the hunt for such “penny” stocks will continue into 2022 too.

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!

2021 ended well and let’s keep the hope alive that 2022 will end on another historic high. Did someone say 70k?

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