Indian Stock Markets in 2022: Reading NIFTY History
India’s stock markets have clipped up on the first two days of the New Year and traders are bullish expecting a similar windfall which they witnessed in 2021. India scored the third largest profits for the stock markets globally in 2021 following France and the US, two of the 10 major economies. This was despite the fact that global investments in Indian stocks were subdued compared the investments by the domestic investors, mainly Mutual Funds run by the banks.
Another fillip to the Indian markets was contributed by the retail investors who joined the investing community in millions aided by the easily accessible app-based investment platforms which flooded the market after the pandemic catering to the investing class in a WFH mode.
Can this rally hold for 2022? Was it irrational exuberance which will flatten out? Will the domestic demand drive the markets in the future? Or was it only a blip as people with discretionary income turned to investments instead of consumption after the pandemic? These are the big questions before the traders and all kind of investors, big and small. A quick look at the NIFTY 50- top 50 stocks listed at the National Stock Exchange- over the last two decades provides a snapshot of how the index can work as a weather bell. But for the heady days of the first Manmohan Singh government at the Centre in 2004 and the second Narendra Modi government in 2019, Nifty generally shows a zig zag movement where high returns in a year are followed by lower returns in the next. As discussed above, 2021 was an aberration due to the pandemic when domestic investors changed the course of the year and Nifty ended with a 24.1% returns over a 14.9% return in 2020 when the pandemic gripped the country.
As domestic consumption tapers off in automobiles and FMCG during the last two quarters and inflation on an upward trend, the Reserve Bank of India may be forced to raise the interest rates dampening the 2021 spirit.
Another pointer to a subdued 2022 is the breadth of the returns in the stock market during last year. While the 30 stock Sensex grew by 21.9% and 50 stock Nifty by 24.1%, the real gains were seen in the medium and small companies showing that the investors were scrapping the barrel of the stock market. BSE Midcap grew by 37.3% while the Smallcap Index jumped a whopping 60.9% during 2021.
A sure sign that the stock market is running out of steam. Further, some of the smaller hitherto unknown companies were outperforming as never before- BrightCom Group’s stock rose by 2603%, Tata Teleservices( Maharashtra) jumped by 2373% and GRM Overseas saw 1619% increase in its stock price. There were another 4 companies whose returns were more than 500% in 2021.
Though predicting stock market moves is a risky business, it is safe to err on the side of caution when it comes to Indian stocks. Nifty has returned 14.5% profits on average since the economic reforms of early 90s, and an expectation around that figure would be a safe bet for the year 2022.
Can this rally hold for 2022? Was it irrational exuberance which will flatten out? Will the domestic demand drive the markets in the future? Or was it only a blip as people with discretionary income turned to investments instead of consumption after the pandemic? These are the big questions before the traders and all kind of investors, big and small. A quick look at the NIFTY 50- top 50 stocks listed at the National Stock Exchange- over the last two decades provides a snapshot of how the index can work as a weather bell. But for the heady days of the first Manmohan Singh government at the Centre in 2004 and the second Narendra Modi government in 2019, Nifty generally shows a zig zag movement where high returns in a year are followed by lower returns in the next. As discussed above, 2021 was an aberration due to the pandemic when domestic investors changed the course of the year and Nifty ended with a 24.1% returns over a 14.9% return in 2020 when the pandemic gripped the country.
As domestic consumption tapers off in automobiles and FMCG during the last two quarters and inflation on an upward trend, the Reserve Bank of India may be forced to raise the interest rates dampening the 2021 spirit.
Another pointer to a subdued 2022 is the breadth of the returns in the stock market during last year. While the 30 stock Sensex grew by 21.9% and 50 stock Nifty by 24.1%, the real gains were seen in the medium and small companies showing that the investors were scrapping the barrel of the stock market. BSE Midcap grew by 37.3% while the Smallcap Index jumped a whopping 60.9% during 2021.
A sure sign that the stock market is running out of steam. Further, some of the smaller hitherto unknown companies were outperforming as never before- BrightCom Group’s stock rose by 2603%, Tata Teleservices( Maharashtra) jumped by 2373% and GRM Overseas saw 1619% increase in its stock price. There were another 4 companies whose returns were more than 500% in 2021.
Though predicting stock market moves is a risky business, it is safe to err on the side of caution when it comes to Indian stocks. Nifty has returned 14.5% profits on average since the economic reforms of early 90s, and an expectation around that figure would be a safe bet for the year 2022.
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