Sensex posts best fiscal return in 11 years

The stock markets may have ended on a sombre note on Wednesday but achieved stellar returns in the financial year 2020-21. In a year marred by pandemic, the benchmark index Sensex posted the biggest gain of 68 per cent in eleven years. In FY10, the index barometer delivered 80.5 per cent returns. Continuing on their dream run, the broader indices trounced the headline index with their superior performance - the mid caps rose nearly 91 per cent and the small cap index grew a whopping 115 per cent during the fiscal year 2020-21. The All-cap index which comprises the LargeCap, MidCap, and the SmallCap posted 77.7 per cent gains during the year.

"As FY21 - a painful disater for humanity but, paradoxically, beneficial for global stock markets - comes to a close, there is hope and optimism in the air. Even though COVID cases are rising in many areas, it is clear that in the race between the vaccine and the pandemic, the vaccine would win. Economies would rebound smartly in FY22. But markets have already discounted this, and valuations are high. But this is unlikely to deter the bulls in the short run," said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

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The performance of the mid caps and small caps was quite disconcerting in the last two years. While the Sensex was down 23.8 per cent in FY20, the two indices faltered at a steeper pace declining 32 per cent and 36 per cent, respectively during the year. In the previous year, when the 30-share index was up 17.3 per cent, the mid caps and small caps were in dumps with a 3 per cent and 11.5 per cent fall.

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Investors' wealth soared 80 per cent to Rs 204.3 lakh crore during the fiscal compared to almost one-fourth erosion in the market capitalisation of all BSE-listed stocks during FY20.

The rally was fuelled by liquidity and strong buying interest from overseas investors. The foreign portfolio investors invested a record $37 billion during the fiscal compared to $1.3 billion investment in Indian equities in the previous fiscal.

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Going further, the fourth quarter results and full-fiscal corporate earnings will set the tone for equity markets in the near-to-medium term. The committed capital expenditure and infrastructure projects outlined in the Union Budget will shape the core sector; the privatisation of banks and recapitalisation is going to play an important role in the markets, says Gaurav Garg, Head of Research at CapitalVia Global Research.

"With recovering economic demand metal sector is expected to share some light. In the upcoming periods technology sector is expected to have profound impact on the markets. Q4 and FY21 earnings are going to be a major event that will give a decisive shape to the market. Also, the second wave of COVID and the pace of vaccination is also going to play a vital role. Overall, we are bullish on the markets for FY22," he adds.

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