2020 was a Roller Coaster Year for the Global as well Indian Capital Markets. The roller coaster ensured that no one is missed during the year, which rewarded patient investors and punished fragile market participants. First half of the year witnessed tragic onset of the “Coronavirus Pandemic”, followed by worldwide Lockdowns, which rock bottomed all the global indices. Nonetheless, the roller coaster turned its course in the second half of the year, to touch the sky. World markets soared on the back of trillions of liquidity being pushed into the financial systems along with historic fiscal stimulus packages to resurrect the falling economy.
The Indian benchmark Indices (Nifty50 and BSE Sensex) delivered a return of +15% during 2020, reiterating the attractiveness of equity as an investment vehicle. The markets bounced back almost 80% from their March lows (Nifty-7511.1, Sensex- 25,638.9), and Nifty finally kissing the magical 14,000 mark on 31st December, 2020. The “hero” behind such a robust bounce back were “FIIs”, pumping in record USD22.0bn in Indian financial markets in 2020, highest in comparison to all other emerging economies. This is in sharp contrast to all other emerging economies, where FIIs were net sellers during the year.
Primary markets had steal the show in 2H’2020, with record INR1.77 lakh crore being raised in 2020 (highest ever in an year), which is 116% increase over 2019’s INR82, 241 crore. The average listing gains from the top 15 IPOs of 2020 was massive 35.5%, way above the previous high of 22.3% in 2017. Although Mrs. Bectors Food Specialities Limited IPO was the last IPO of 2020, it became the most subscribed IPO of the year, at 198.02 times.
There was no sales for almost 2 months in 2020, yet there was no respite in fixed costs. Hence, India Inc. looked for external financing to fund their operations, and there kicked in Rights Issue and QIPs which saved the day for them. Reliance Industries was one of the biggest beneficiary of external financing and it alone raised INR53, 125 crore in right issue in 1H20. Whereas, Banking and Financial Services Sector were the most sought after in the QIP segment.
The love for Indian equities was driven by several themes: corporate tax reforms, much awaited interest rate cuts, India’s growth story, abundance of global liquidity and quick economic revival on the hopes of vaccine. But markets once again proved in 2020 some of its age old theories, which never goes obsolete:
“Markets are forward looking”
“No one can predict the bottom”
“Prices are Supreme”
While you ponder upon the market performance of 2020, and if you think that you have missed the bus, don’t worry. We will soon come up with the 2021 expectations for various asset classes, including equity.
Till Then Sayonara, Take Care, Continue Your SIPs!