None of us will ever forget the year 2020 for the unprecedented changes it bought across the globe. In addition to causing numerous disruptions, the crisis has been an extraordinary experience for investors as it dragged the global economy to significant lows.
Equity markets, which sunk in late February and March 2020, rallied strongly in the following months due to the unprecedented support from governments and central banks across the globe.
The search for returns has become trickier as investment conditions continue to be tighter. Now is not the time when we can look to the past for guidance.
While the social and economic uncertainties stemming from the pandemic won't suddenly subside as we enter the New Year, a rigorous analysis of the market conditions and sound judgment can make investing highly rewarding.
Let us talk about what is expected to shape investments and markets in the year ahead.
Emerging Trends in the Equity Market
As we all know, the ongoing crisis is pandemic driven and the natural end to it, will either be through plateauing of death rates or the reach of the launched vaccines.
Therefore, people would be looking for the distribution of the vaccine and the key companies involved in the process till mid-2021.
Further, the policies framed by Joe Biden will play a crucial role and have a significant impact on the Indian market directly as well as indirectly.
As global investors start looking at the fundamentals of Asian companies once again, Joe's stance on trade between the countries and other key policy measures, make his influence all the more significant.
Otherwise, Indian markets are expected to see an upward trend as most institutional investors plan to trim the US equities and pour in the capital to various emerging markets as they have been doing in the latter part of 2020.
Additionally, FII inflows in India and COVID-19 unlock will continue to influence the investment and market trends.
Changes in Investment Style: Predictions for FY-2021
However, if these trends are any indication, some sectors will benefit a lot. Certainly, the stocks which saw a dip will be on the radar list of the investors.
It is wise if investors play strategically and monitor changes that will impact their present portfolio given the post-COVID scenario impacting certain sectors.
Also, we might see investors’ interest shifting to real estate investments such as those of REITs as post-COVID recovery is bound to happen in these stocks.
COVID-19 has changed the investment styles of people the world over and the evolving behaviour will continue to influence the market for a long time.
Pharma investments could continue to see positive growth due to promising announcements on the vaccine front along with companies that sell cooling systems and provide logistic support.
Further, travel stocks could be seen as a lucrative option such as the long-pushed airline stocks, hotels and cruise lines.
In the latest report of Fitch Ratings, it has predicted that the outlook for India is brighter, as a result of an expected rollout of various vaccines in 2021.
India may regain the fastest growing economy tag in 2021, growing faster than most major economies, including developed markets, European nations, and emerging markets.
In addition to the expected rebound, the calendar year 2021 is expected to be mostly guided by growth in corporate earnings.
Further, after the decent performance so far in 2020 despite the pandemic, a bumper crop is awaited by the initial public offer market with over 30 IPOs worth more than Rs 30,000 crore lined up for the new year. The primary market has been good so far and the street is abuzz with more issues being lined up.
While we can see the light at the end of the tunnel as researches are being done rapidly, we cannot be sure about any of the prediction amid rising COVID-19 cases.
Also, there is no certainty about the preparation of the logistics sector to make the vaccine available across the country. Hence, the market perspective remains unstable till the mid of 2021.
(The author is Senior Vice President Master Capital Services)
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