Stock markets braved all odds this fiscal year, rewarding investors with high returns as the benchmark Sensex index surged more than 66 percent despite Covid-induced disruptions and concerns about its economic impact.
Due to the pandemic, market analysts described the 2020-21 financial year as a roller coaster ride not only for Indian markets, but also for stock indices worldwide.
In an unprecedented comeback, the 30-share BSE Sensex is up 19,540.01 points, or 66.30 percent, this fiscal year.
This extraordinary rally is significant as the markets have seen volatile trends this fiscal year. The BSE benchmark hit its annual low of 27,500.79 on April 3 last year. However, towards the end of the fiscal year, the indices rose and the frontline BSE 30 stock index hit its all-time high of 52,516.76 on February 16, 2021.
“The bull run was fueled by the continued development and strong boom in the economy. The vaccine discovery and associated optimism added strength to the bulls. Worldwide markets rallied tremendously in November. Emerging markets continued to be flooded with FPI money “said VK Vijayakumar, chief investment strategist at Geojit Financial Services.
ups and downs
The Sensex benchmark reached record highs several times in this fiscal year, which ends on March 31st and only two trading days remain.
The Frontline Index closed above the 50,000 mark for the first time on February 3 of this year, largely due to euphoria over the Union budget. It closed above the 51,000 mark on February 8th.
On February 15, it rose above the 52,000 mark for the first time.
“The Union budget for 2021 was groundbreaking. Important reform initiatives such as privatization have further improved the mood of the markets,” said Vijayakumar.
From mammoth losses to record profits, investors experienced a multitude of emotions in the 2020-21 financial year.
Equity markets had stalled in March 2020, and the Sensex fell massively 8,828.8 points, or 23 percent, that month as concerns over the economic impact of the pandemic battered investor sentiment.
Ajit Mishra, vice president of research at Religare Broking Ltd, said the main factor that ensured the market rally continues was the reopening of the economy, which led to the launch of the companies. “In addition, government and RBI support has put the economy and macro factors back on track. Ultimately, the supportive global markets and the start of the vaccination campaign have pushed markets higher.”
Recently, the markets have seen corrections in the face of soaring Covid-19 cases in the country, which have once again weighed on investor sentiment.
“Now a second and in certain parts of Europe a third wave of Covid is a big problem. Even if this is negative, it is unlikely to have much of an impact on the markets as vaccination is advancing at a healthy pace. Also the second Wave has not resulted in a lockdown, it has only limited economic activity, “Vijayakumar said.
Along the way, Vijayakumar noted that markets are likely to remain buoyant as the US Federal Reserve is required to keep interest rates near zero through 2023.
“There was some sell-off in the markets recently as the US 10-year yield rose. If the US 10-year bond yield rises above 2 percent it can cause a sharp correction in global equity markets, so this area needs to be watched be, “he remarked.
Mishra says the sentiment has already had an impact on the markets. “We don’t expect panic, however, as investors are aware that the government’s focus is more on reviving the economy. We also expect the vaccine drive to gain momentum in the coming months, which would further ease the pressure.”
As the second wave of Covid hit investor sentiment, “we believe that consolidation cannot be ruled out in the near future,” Mishra said.