The Indian stock market rose 15% in the last calendar year 2020, driven by inflows of foreign funds, investor sentiment and strong fundamentals. During the year, foreign institutional investors (FIIs) injected $ 23 billion into Indian stock markets. In addition, the number of demat accounts opened during fiscal year 2020 was at its highest for at least 10 years, at 4.9 million, an increase of 22.5% compared to the 4 million demat accounts opened. ‘last year. India had 40.8 million demat accounts at the end of fiscal 2020, up from 35.9 million as of March 31, 2019, according to Kotak Mutual Fund.
Momentum is expected to continue into calendar year 2021
Sequentially, economic activities improved thanks to the government’s fiscal stimulus, skillful management of the RBI through liquidity, rate cuts, and financial sector stability. In addition, a decline in active cases of COVID-19 has been observed despite the unlocking phase of the economy. The Kotak mutual fund expects this momentum to continue into calendar year 2021, with the manufacturing and services PMI above 50. In addition, it expects a season of rabi exceptional due to an above average monsoon. On the COVID front, he believes vaccination will reduce the threat of a second wave of coronavirus. The AMC also said government spending will remain higher in the second half of fiscal 2021, compared to the previous year.
But don’t go too far on stocks
Nilesh Shah, Managing Director of Kotak Mahindra Asset Management Company, advised investors not to overweight stocks at current valuations and look for fair asset allocation strategies. In a virtual press conference, Nilesh Shah also said that while the stock market is still not in a bubble zone, there is little optimism. At the end of December 2020, the Nifty 50 Index was valued at P / E (x) a year ahead of 21.7 times, a premium to the long-term average of 17.9 times. While Nifty P / B (x) of one year term has been valued at 3 times, which is a 3 times premium over the long term average.
Next 4-5 quarters could see bullish business results
For the year 2021, Harsha Upadhyaya, President and CIO – Equity, Kotak Mahindra AMC, said that data such as GST collection in December was at Rs 1.15 lakh crore which was the highest monthly flow. high since its implementation. In addition, in the last month of 2020, the country’s energy consumption increased by 6.1%, India’s foreign exchange reserves hit a record high, and freight loading increased by 8.54 % during the month compared to last year. Upadhyaya expects the October-December quarter to be quite strong; and thereafter, January-March 2021 and April-June 2021, even more solid quarters. All in all, he believes, India Inc could have four to five good quarters in a row. “Any hiccups in earnings growth can impact the markets,” he added.
Nilesh Shah added a word of warning, saying that the results for the third quarter of the current fiscal year will indicate whether September’s earnings growth momentum will continue.
Upadhyaya also expects substantial profit growth in fiscal 22 and better overall profitability. Profitability also appears to remain strong. All sectors could post positive growth in the October-December quarter thanks to a widespread market recovery. In addition, a cyclical revaluation is expected. The overweighted sectors include private banking, insurance, automotive, cement, among others. Nilesh Shah said CY21 will benefit from a boost from REIT inflows, MSCI redevelopment and investor preference for the asset class.