By Prem Prakash
The calendar year 2020 has been a single of the most volatile years for stock markets and a single which market place participants are going to try to remember for a lengthy-lengthy time. It was a year which was complete of surprises and would be remembered for a lot of points like the pace with which the pandemic accelerated, the scale of the lockdowns, the government stimulus initiatives, and the magnitude of stock market place rebounds.
In January’20, the Indian benchmark indices hit a fresh all-time-higher (ATH) of 12430 and in December’20, Nifty was trading at an ATH of 13777 which is virtually 1300 points above Jan higher but what is to be also noted is that, in this journey, it also created a 4-year low at 7511. The year 2020 had when once again proved the old saying of the stock market place ‘Expect the Unexpected‘. The year has been one of the most volatile years for the stock markets in the recent past. NSE’s Nifty50 has traded in a variety of about 6000 points and BSE’s Sensex traded in a variety of about 20,000 points. Never ever, we have observed such a broad variety for Nifty and Sensex in a calendar year. We have observed the markets develop about 80% from the March lows and about 12% in the calendar year 2020. The overall performance of Indian benchmark indices was in line with the international indices like DOW, NASDAQ and so on.
With respect to the financial activities and GDP development, India’s GDP contracted by about 24% in the initial quarter which was a single of the worst amongst all the big economies across the globe. However, it was also due to the fact, to manage the spread of COVID-19, India had imposed a single of the strictest lockdowns across the globe. Also, GDP numbers for Q2 shocked absolutely everyone and albeit adverse, it was way improved than what most of the persons estimated. In Q2, India’s GDP contracted by 7.5% and now the expectation is that India’s GDP development would turn constructive in Q3 itself.
India has officially entered recession (as two successive quarters of GDP contraction is termed as a recession) following the declaration of the GDP numbers for the Q2. And as of now, we are in the early stage of the post-recession recovery. This suggests a prolonged period of low-interest-price development that favors equities more than the bond market place. However, we might not witness a equivalent type of rally in the stock market place as it was in 2020, but the all round trend might continue to be bullish. In the quick term, we might face some uncertainty due to the new strains of Corona Virus in the European nations, geopolitical difficulties in China, Iran, and Russia. Also, the market place will keenly observe how the distribution and logistics for the vaccine takes place and what is the effectiveness of the vaccine in controlling additional spread of COVID-19. All these may possibly lead to a roller coaster ride for the markets in the initial half of 2021. However, with the businesses posting improved outcomes every single quarter, we can anticipate India to post constructive GDP numbers in 2021 and markets to respond cheerfully to such overall performance.
The big occasion which absolutely everyone is searching forward to in 2021 is the announcement of the common price range on 1st February. The government has got a daunting process for the price range with fiscal deficit shooting up to about 7.5% of the GDP.
Considering the current sharp rally in equity markets, investors need to adopt utmost caution though investing. They need to do a thorough evaluation of their investment objective, time horizon, threat appetite and then strategy their investments.
(Prem Prakash is the CEO at CapitalVia Global Research Ltd. – Investment Advisor. The views expressed are the author’s personal. Please seek the advice of your investment advisor ahead of investing.)