Sensex rises 22%, Nifty gains 24% in 2021: Here's what to expect next year

Benchmark indices clocked strong returns in 2021 with the economy showing signs of recovery from the coronavirus lockdown and a rise in Covid-19 vaccination across the country. Sensex gained 21.99% (10,502 points) and Nifty rose 24.15% (3,374 points) since the beginning of this year.

Indian market surged to its record high on October 19,2021 with Sensex and Nifty extending their winning streak for the seventh straight session. While Sensex hit all-time high of 62,245, Nifty zoomed to a record of 18,604 on an intra day basis.

Achieving the milestone of record highs, Sensex had clocked a gain of 139.57% and Nifty had rallied 144.46% from their March 2020 lows.

Sensex and Nifty hit four-year lows on March 23,2020 after rising number of cases in India and the resultant lockdown in a majority of states took a heavy toll on the financial markets. While Sensex closed 3,934 points lower at 25,981, Nifty ended 1,135 points lower at 7,610. Subsequently, indices fell off record highs as investors booked profit and global markets accounted for a rise in coronavirus cases in US and the UK.

However, on the last trading day of 2021, Sensex and Nifty ended in the green. Sensex closed 459 points higher at 58,253 and Nifty climbed 150 points to 17,354. The market outlook for next year looks volatile with the number of Coronavirus and Omicron cases rising across the globe.

Here's a look at what market experts said about the likely direction of market in 2022.

Jyoti Roy - DVP- Equity Strategist, Angel One said, "Given the aggressive tightening by the US Fed, there will be a slowdown in FII flows next year though domestic flows should remain robust and make up for any shortfall in FII flow. Nifty P/E based on consensus rolling one year forward multiples have come down from 23.0x to 20.7x, though it's still at a 10% premium to 5 year historical average of 18.6x. Given premium valuations and likely slowdown in FII flows, we believe that we are unlikely to witness a broad-based rally like last year, and hence bottom-up stock picking will be the key to generating alpha going forward."

Dhiraj Relli, MD & CEO, HDFC Securities said,"Post a super show in 2021, 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.

However, the Indian market still has the potential to positively surprise, as a macro construct (GDP growth, tax collections, flush liquidity, the start of a Capex cycle, a listing of start-ups leading to risk-on sentiments, supportive monetary policy, better than expected pace of macro recovery post-pandemic, likely inclusion of Indian bonds in the global bond index by Q2FY22 and strong vaccination drive) and earnings remain largely supportive."

Axis AMC in its annual outlook said, "Year 2022 like the previous two years can be the one where volatility will be a key part of the markets. Markets have seen a one-way rally since 2021 driven by several tailwinds in the economy, the progress of the vaccination and the return of corporate profit growth. Omicron, demand recovery & return to normalcy along with the monetary policy stances will be key things to look out for as the year progresses."