Samvat 2077: Nifty registers its highest-ever returns in last 12 years

On the other hand, pharma, FMCG, and private banks moved in a range of 20-30% each.

Samvat 2077 has turned out to be historic year for equities, despite the pandemic. The benchmark Nifty50 clocked its best ever returns 12 years. While loose monetary policies adopted by global central banks was a big factor that drove markets, strong retail participation was also a key trend that emerged.

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Foreign portfolio investors continued to keep the faith in the Indian equities and pumped in $18.73 billion during the period, which is the second-highest after $22 billion seen in Samvat 2069.

The Nifty also clocked its best-ever returns in 12 years (Samvat 2066-Samvat 2077), data from Bloomberg showed.

The benchmark index managed to deliver more than 40% returns during Samvat 2077 as investment from FPIs (foreign portfolio investors) stood as a major factor driving the rally.

The BSE Sensex surpassed 60,000 levels from its pandemic lows of nearly 25,000, while the Nifty50 crossed 18,000 from its lows of 7,600 in March 2020.

With alternative sources of investment, like bank deposits and fixed income products, yielding low returns, equities became the preferred investment destination for retail investors in Samvat 2077 and in all likelihood this is expected to continue in new Samvat too. Says Deepak Jasani, head of Retail Research at HDFC Securities, “Rising allocation out of financial savings to equities in India also led to the rise in indices. This shows the potential of an even higher allocation by Indians to equities as an asset class and its impact on valuations in future.”

However, the broader markets significantly outperformed the benchmark indices during the period with both BSE Midcap and Smallcap indices skyrocketing around 75% and 95%, respectively. The space however witnessed muted action in previous years of 2019 and 2018.

According to Axis Securities, “Samvat 2077 returns were broad-based primarily on account of better participation witnessed across stock categories as well as sectors which was relatively narrow in the pre-pandemic years.”

While the industrials, cyclicals and value stocks performed well in Samvat 2077, the New Year would see a play on earnings recovery and post-Covid themes like travel and tourism, out of home consumption-driven sectors.

Cyclical and high beta stocks were some of the key themes witnessed during Samvat 2077. Tracking individuals, the metal, realty, and public sector banks dominated others, advancing over 156%, 125%, and 115%, respectively, according to a report from Kotak Securities. On the other hand, pharma, FMCG, and private banks moved in a range of 20-30% each.

Samvat 2078 is likely to face some headwinds in the near term as rich valuations in the market coupled with concerns over inflation amid rising commodity and oil prices will keep the markets in check. Furthermore, the central banks hinting about withdrawal of pandemic measures and possibilities of interest rate hikes could also further lead to some negative action, experts highlighted.

“Price trends in global commodities could be a key factor to watch out for as sustained rise in crude and commodities can increase inflation and change the interest rate stance of central banks and increase near term volatility,” Amnish Aggarwal, Head of Research, Prabhudas Lilladher told FE.

However, rapid pace of vaccination in the country and better economic recovery will continue to provide firm support to the markets in the long term, analysts explained. The earnings session and confident management commentaries also pose a strong outlook for companies, negating pressure from higher input costs.

Moreover, Samvat 2078 will be driven by higher consumption across the country and consumption-driven sectors will be the key themes to watch out for. Travel and Tourism, Banks, and Auto are some of the top counters to look out for in Samvat 2078, said experts.

“We believe Banks, Auto, Platform Companies, Multiplexes, Retail, CGD and Capital Goods/Infra would do well in the coming Samvat,” Aggarwal added.

Furthermore, amid a few concerns in the market currently, analysts expect the Nifty to move in the range of 12% to 15% during Samvat 2078, and the earnings to GDP ratio is also expected to improve in the upcoming year.

“We expect the Nifty 500 earnings to GDP ratio to improve from a low of 2.5% in FY20, to 3.4% in FY23E (the highest after FY15). Further, Nifty can potentially deliver ~12-15% returns over Samvat 2078,” said Binod Modi, head-strategy, Reliance Securities.