2021 was really an exceptional year for the Indian stock markets. This is the best year since 2017 for Indian stocks. In this post, we talk about the brilliant 2021 for stocks in India and the future outlook for the year 2022!
Which instrument can give you a 60% return in a year on your investment? When someone asked this question to you a year ago, I am sure not many would have chosen the equity options. 2021 has changed it altogether. 59.3% annual return in NIFTY Smallcap 100 Index, and 46.1% annual return in the NIFTY Midcap 100 index! All you had to do was to invest in the index, sit back and relax. Voila! Your profile is up by numbers which you can’t imagine in traditional investment models. The Sensex and Nifty went up by 22% and 24% in the year 2021.
What Lead To Rally In Indian Stocks?
Many factors. Retail participation was at the highest levels. The number of Demat accounts opened in 2021 (27.4 million) is more than 2.5 times that of those opened in 2020 (10.5 million). Economic recovery, vaccine coverage, and healthy corporate results fuelled the rally in the Indian equity markets. This was also further supported by the RBI’s easy money policity wherein the interest rates remained low.
Future Outlook – 2022 for Stock Market?
The year 2022 may not see a huge rally in the Indian markets unlike 2020 & 2021. The rising inflation rates, US Fed Tapering, hike in oil prices, upward revision in domestic interest rates, fear of Omicron are looming large on the Indian equity markets in 2022. We expect the market to give average/moderate returns. So boil down your expectations.
Beware
All that glitters is not gold. 2021 was an “exceptional year”. It is highly improbable that we see such exceptional years frequently. Reopen trade, Government policies and economic growth trajectory instigated this upward trend in the Indian stock markets in 2021. The year 2020 saw Covid-19 related disruptions in the economy. Even then, the Sensex and the Nifty jumped around 15-16% annually in 2020. To expect the repeat of 2017, 2020, and 2021 each and every year is a dangerous premise. As always, equity investments are subject to market risks. Any decision you make without due diligence can land you up in heavy losses on your capital.