Bulls to Rule For Now

EQUITY MARKETS ARE ENTERING THE NEW YEAR WITH HOPE. HERE’S WHAT LIES AHEAD

- TRIPTI KEDIA

A YEAR THAT STARTED with dashed hopes is ending with building expectations. The year 2020 was spoiled by the worst pandemic in a century and huge economic losses. Revival of equity markets in the second half was a pleasant surprise.

The year 2021 looks promising. The bulls are raring to go, reflecting expectations about Covid-19 vaccine launch, promising corporate earnings, accommodative monetary policy, flush of liquidity and 15 per cent Nifty returns seen in CY20. Investors are all strapped and set to ride the bulls, although with some caution. “2021 will be a year of recovery. We have already ridden the roller coaster. With government increasing spending and earnings of companies improving, we have added new clients. It’s time to get returns in the first half of this year than the second half,” says Rusmik Oza, Executive Vice President, Kotak Securities. During April-September, India added 63 lakh demat accounts as compared to 27.4 lakh in corresponding period last year, an increase of 130 per cent.

The FII Angle

Foreign investors have also pumped in huge liquidity into markets. Data shows that foreign institutional investors (FIIs) pumped in close to $23 billion in India in 2020. Analysts expect that $15-20 billion more will flow in 2021, making India a relative outperformer in comparison to other key emerging markets. South Korea and Taiwan, which posted stellar returns of 26 per cent and 18 per cent, respectively, saw equity outflows of $15-17 billion in March-November 2020. A more predictable and stable policy making under the Biden presidency in the US and weaker dollar due to higher fiscal spending and lower interest rates also augur well for FII inflows to emerging markets.