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Indian stock markets ended 2021 on a strong note, ending Sensex ending the final day of 2021 with gains of 0.8% to settle at 58,253. The Nifty finished 0.87% higher at 17,354. For the year, BSE Sensex and NSE Nifty closed out 2021 with gains of 22% and 24% respectively – the best in four years. Despite valuation concerns, India’s blue-chip Nifty 50 was one of the best performer among emerging markets in Asia in 2021, and outpaced the MSCI World Index which rose 17%.
Indian equities scaled a record high in October, but have retreated nearly 7% on worries over high valuations and the spread of Omicron across the globe.
Post a super show in 2021, says Dhiraj Relli, MD & CEO, HDFC Securities, valuation levels in Indian equities could make most people cautious on India within EMs and Asia. “Indian equities are running into many challenges, including the US rate cycle, rising oil prices, elections in key states, potential Covid wave 3, upward inflexion in domestic interest rates, rich headline valuations and strong relative trailing performance,” he said.
“Transition to 2022 will see a more normal monetary policy, and investors could do well to expect more moderate returns from financial markets. Central banks will start to raise rates but remain more tolerant of inflation. Central banks and their assessment of economic conditions will likely be front and centre once again in shaping investment strategies in 2022,” he added.
Naveen Kulkarni, Chief Investment Officer, Axis Securities, said: “2021 has been a year of recovery, rehabilitation, and establishing a base for future growth. 2022 will be a little more volatile but will still be very good for equity investors in India. 2022 is very likely to be another year of good double-digit returns and continued wealth creation. Autos, Banks, and Capital goods, literally the A B C of equity markets, will be the most interesting sectors for 2022.”
Markets can be more discerning in 2022, said Dhiraj Relli, MD & CEO, HDFC Securities, and “hence sticking to high quality companies and maintaining your planned asset allocation remains key for a better outcome from 2022.”
In the near term, the trend looks positive, say analysts. “Nifty has successfully closed above the 17350 level – this should allow the Nifty to move up further to 17500-17600. 17100-17150 is the new level of support and as long as that holds, the trend of the Nifty is positive,” says Manish Hathiramani, proprietary index trader and technical analyst, Deen Dayal Investments. (With Agency Inputs)
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