4 key stock market trends for 2021

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While 2020 has been a year of tremendous resilience in the face of a raging Covid-19 pandemic, the year 2021 was about converting an advantage into a position of strength. Although a second wave brought us to our knees, thanks to the accelerating pace of vaccination, the economy opened up earlier, taking small steps first and then giant steps towards normalization.

Yes, the fear of being caught off guard by an unknown virus variant or an uncontrolled spate of cases persists. But, the markets have learned to live with such risks. For the national stock market and participants who anticipated early on that Covid would not be the real Armageddon for humanity, the rewards continued to be rich in 2021. Here is a detailed look at how the year has turned out. is rolled out for Popular National Indices, a look at the top performing sectors and stocks as well as the disappointing laggards, and how stock market wealth creation has unfolded.

The Sensex, the popular market barometer, has refused to wither and posted a healthy 21% gain this year (through Dec. 16), continuing the sixth consecutive calendar year of gravity-defying gains. And that’s just to start. The bull run has been deep this year, with mid and small caps joining in the fun more significantly. The BSE Midcap Index gained 41 percent, nearly double that of Sensex, and only the third time in a decade when mid caps outperformed large caps by 100 percent in a calendar year.

For those with a stomach for riskier small caps, the returns were the highest, with the BSE Smallcap Index up almost 62%, almost 3 times the Sensex and the second time it was has been produced over the past two decades.

In 2021, “ATH” or historic highs gained currency, as in all other bull markets. The large-cap Sensex has hit its ATH up to 52 times out of the 239 trading sessions this year so far. It was a broad representation of what was going on below, where stocks of all sizes and shapes found new takers. As a basket, large caps, that is, the 100 largest stocks by market cap, have seen 78 percent of them reach respective all-time highs this year. So, it doesn’t matter whether you own RIL, TCS, HDFC Bank, Infosys or SBI; the bulls pushed most of them to uncharted territory in the stratosphere. Only ITC shareholders will hold a grudge, because their ATH, hit in July 2017, is still a long way off.

In the mid-cap space, i.e. from the 101st to the 250th in mcap, 69% of stocks – including Gujarat Gas, Cholamandalam Investment, Page Industries, Balkrishna Industries, HAL and ACC – have reached their all-time highs. Note that a section of mid-cap PSUs has yet to revisit their ATHs.

The dynamism of small caps was also essential. Almost 5 out of 10 small caps, such as TTK Prestige, DCM Shriram, Radico Khaitan, Manappuram Finance and Welspun India, have peaked in 2021 and that’s quite an achievement given the vastly large universe at this low level. liquidity. market bucket.

For investors investing solely on the basis of valuation metrics such as price / earnings (P / E), 2021 has thrown a mixed bag (See the table).

Until some time ago, the popular narrative of the rise in Indian markets has always been Foreign Portfolio Investors (REITs). But 2021 was different in this regard. In 2020, REITs paid lakh 1.7 crore in shares, with foreign investors registering net inflows for 10 of the 12 months. In fact, it was the highest inflow of REITs ever recorded in a calendar year!

But the REIT’s mood deteriorated dramatically in 2021, with around € 31,000 crore injected, 6 out of 12 months seeing net outflows.

You can blame the Fed’s tapering, historically high valuations, or just foreign hand-accounting of profits. But the resilience shown by domestic actions has bamboozled everyone. This was possible thanks to the great confidence shown by national investors, directly or indirectly through institutions. Call it the Aatmanirbhar Bharat effect! Of course, it remains to be seen how the desi shield resists relentless selling abroad.

In 2021, when sold in the spot market, the blow was softened by domestic institutional investors (DII). For example, REITs sold shares worth 26,000 crore in the cash segment in December 2021, while DII bought over ₹ 20,000 crore. In November 2021, when REITs sold 39,900 crore, DII bought 30,560 crore.

The latest shareholder data also confirms the same trend. REIT ownership, in terms of value, fell 128 basis points (bps), from 22.75% in December 2020 to 21.47% in September 2021. During the same period, DII ownership edged down 44bp, from 13.56% to 13.12%. hundred. At the same time, the holdings of retail investors jumped 23 basis points to 7.13 percent, from 6.90 percent.

The sharp increase in investor / demat accounts, required to trade stocks, also corroborates the evolution of market dynamics theory.

With an average of 24 lakh accounts opened per month from January to October 2021, money from 738 lakh accounts is pouring into stocks with unprecedented enthusiasm amid interest rates from bank FDs, the investment option of base for households, at historically low levels.

According to the number of investors registered by the BSE, the overall national growth in the number of stock market investors has been around 55%, states such as Assam, Telangana, Madhya Pradesh, Rajasthan, Uttar Pradesh, Chhattisgarh and Odisha showing faster growth than the pan-Indian average. The list of states / UTs with the highest number of investors is led by Maharashtra, Gujarat, Uttar Pradesh, Karnataka, Tamil Nadu, West Bengal, Delhi and Andhra Pradesh (See the table).

As the world limped back to the pre-Covid vibe, sectors of the old economy grabbed attention in 2021. Otherwise, who would have thought that electricity would be the top performing sector this year?

While 2020 saw healthcare and IT emerge as the life blood of our Covid-ravaged lives, the top performing sectors / industries in the stock market this year (through December 16) were energy ( up 74 percent), metals (up 69 percent), basic materials (up 62 percent), real estate (up 58 percent), capital goods (up 52 percent ) and infrastructure (up 48 percent). IT still managed to rack up a 46% gain even in 2021, but health (up 15%) was all the way down with FMCG (up 8%) and banking (up 16%) .

Not a single sector / industry index (in the BSE) recorded negative returns in 2021, a rarity. In the last bullish years, there have always been a handful of market segments that have fallen out of favor, such as Oil & Gas and Bankex (2020) and Metals & Autos (2019).

The electricity index was led by massive gains in stocks Adani Transmission, Indian Energy Exchange (IEX), Tata Power and Adani Power. NTPC, KEC International and NHPC lagged behind, but each got double-digit return percentages. In the Metals pack, APL Apollo Tubes, Vedanta and SAIL stood out. Sobha, Mahindra Life Space, Brigade drove the gains in the real estate space – Phoenix Mills, Sunteck and Godrej Properties have ranked low even after posting decent gains for 2021 so far. The capital goods sector posted a dynamic performance in shares of Grindwell Norton, Carborundum Universal and SKF India, while AIA Engineering lagged behind.

IT, a favorite in 2020 too, has seen KPIT Technologies lead the way, closely followed by Happiest Minds Technologies, Tata Elxsi, Persistent Systems and Mindtree – all gaining at least 200% for 2021 alone!

In terms of lagging industries / sectors, FMCG, Healthcare and Banking are at the back of the pack. An increase of around 8 percent in FMCG isn’t bad after posting 13 percent gains in 2020. While the vast FMCG space has performed well, large caps such as HUL, ITC, Nestle and Britannia were calm in 2021. Health, the star of 2020, has consolidated this year with big names such as Sun Pharma, Divi’s and Apollo Hospitals doing well while Dr Reddy’s, Biocon and Lupine have had a forgettable year. The banking sector was mixed, with ICICI Bank and SBI doing well, but HDFC Bank, Kotak Mahindra and IndusInd fell silent.

If you look at the BSE Allcap index which has around 1,060 stocks, investor wealth has increased by over 65 lakh crore or 35% in 2021. Up to 87 of the top 100 stocks, in terms of mcap, recorded positive returns. The remaining 13 have fallen as much as 20 percent. The wealth gains of large-cap investors amounted to 44 lakh crore. The top-performing large-cap stocks – Adani Total Gas, JSW Energy, Adani Transmission and Adani Enterprises – gained between 200% and 400%. Latecomers include Hero Motocorp, HDFC AMC, Dr Reddy’s Labs, ICICI Lombard, and Kotak Mahindra Bank.

In the burgeoning mid-cap space, the gains were larger although the winners’ share (126 out of 150 or 84 percent) was similar to that of large caps. The best performers from this list of 150 stocks were Brightcom Group, Tata Teleservices Mah. and Trident. The worst performers in this space are Bandhan Bank (down 34%), YES Bank (down 30%) and Aurobindo Pharma (down 24%). Investor wealth gains added in mid caps in 2021 amounted to 12.5 lakh crore.

Small caps make up BSE Allcap’s largest basket, with over 800 stocks, and around 85% reported gains in 2021. The wealth addition from small cap investors was around 9 lakh crore this year. Since small caps are the riskiest on the cap spectrum, the number of stocks that have doubled since 2020 was over 200. Top performers include GRM Overseas (over 1,400%), RattanIndia Enterprises (over 700%) and Nahar Spinning (over 500 percent). Small-cap stocks that destroyed investor wealth in 2021 include Ujjivan SFB and Ujjivan Financial Services (down 50% each).

With 2021 a fabulous year overall in terms of returns, newly listed stocks (listed in the year through December 2020) have done well. Of the 14 stocks newly listed on the ESB motherboard, 9 beat Sensex’s earnings in 2021. The best performers were Happiest Minds, Angel One, UTI AMC, Route Mobile and Equitas SFB.

Penny stocks, those priced below 10, are popular with some retail investors, even though they are very illiquid counters with often weak fundamentals.

Of the 600 penny stocks (prices lower than 10 at the end of 2020), around 540 or 90% gave positive returns in 2021. The biggest winners have increased by at least 2000% and include Adinath Textiles, Radhe Developers, Digjam, and Chennai Ferrous. Note that penny-listed stocks such as Sagar Productions, Trio Mercantile, BC Power, Chandrima Mercantiles and Ishaan Infrastructures have lost 40-60% of their value in 2021 so far. This should serve as a caveat for investors who wish to bet on lesser-known names.


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