Will 2022 be as Brisk and Profitable as 2021?
As we bid adieu to the calendar year (CY) 2021, we realise that the markets have come a long way since the first wave of the pandemic broke out in the first quarter of 2020. The Nifty has rallied almost 147.69 per cent from the low of March 2020 to the highs of October 2021. The year 2021 was not less than a fairy tale for market participants but with too many hiccups. Many stocks rewarded investors with handsome returns; however, the brisk pace of the bull phase was disseminated in the last couple of months of the year amid outflow from FIIs, economic disruption caused by the new variant of the corona virus and the global central banks sounding more hawkish.
In spite of the windy storms faced by the markets in the last couple of months, investors would have nothing to complain about the returns delivered by the equity market as Indian equities performed bigheartedly in 2021. The benchmark Nifty is up by 23 per cent in 2021 and it is the sixth consecutive year of positive returns on Nifty which has now returned positive returns in nine out of the past 10 years i.e. 2012-2021. This is not where the story ends. Even with several challenges, long-term buy and hold investors have managed to fetch a five-year rolling CAGR of about 16 per cent, which is the best performance since 2013.
The five-year absolute Nifty return in 2021 is 110.5 per cent, also highest since 2013. Interestingly, the market returns were fairly broad-based in 2021. Nifty Small-Cap (57.05 per cent) and Nifty Mid-Cap (44.03 per cent) have done significantly better than Nifty (23.04 per cent). Moreover, 2021 was a year of multibaggers as from the NSE universe of stocks with daily volume of more than 35,000 nearly 336 stocks have turned multibaggers. This is significantly higher than the count of last year. In 2020, there were 161 stocks which turned multibaggers.
Also, in 2021, the number of stocks which delivered positive returns was about 1,031. Thus, this data clearly reflects that one would have to be a really unlucky investor to have not generated positive returns in 2021. The sectors which emerged as the biggest winners of this bull run were Nifty Metal and Nifty IT. Apart from the year of multibagger stocks, year 2021 will also be remembered as the year of IPOs with a tsunami of them in 2021. It also broke the record for India’s largest IPO with Paytm’s parent company One 97 Communication witnessing its debut in 2021 on the bourses.
To those investors who failed to get any IPO allotment in 2021, we would suggest not getting disheartened as the IPO pipeline continues to remain strong in 2022 as well. So, what lies ahead in 2022 for the equity markets? The first few months of the year are generally very active in the financial markets. The company’s earning season is one factor while in February the Union Budget will be presented even as the year-ending taxes are collected. In 2022 what lies ahead is a cocktail of uncertainty. As the corona virus and its multi-headed variants continue to dangle the sword on both sentiment and economic activity, state elections in Goa, Manipur, Punjab, Uttar Pradesh and Uttarakhand are also expected to keep market participants on their toes.
And of course, to top it all, the billion dollar question which remains to be answered – the answer to which we are most likely to get in 2022 – is about the liquidity flow. Liquidity flow has a large question mark against it as global central banks are increasingly sounding more hawkish and historically we have seen that declining global liquidity has been problematic for growth. So, by many accounts the year 2022 is likely to be like a test match where an investor has to play exactly in the same fashion as a top-quality batsman who plays with patience and determination while waiting for the right opportunity to dispatch the ball out for a boundary. Hence, investors also need to patiently study businesses. Only when you find the right opportunity, should you commit your funds to the market.
