At close of trade on March 31, the S&P BSE Sensex, at 49,509.15 points, recorded an absolute gain of 21,243.84 points, or 75.2%, compared to 28,265.31 points—the closing value on April 1 last year.

Similarly, on the last trading day of FY21, the Nifty 50, S&P BSE MidCap, and S&P BSE SmallCap recorded an absolute gain of 6,436.9 points (+78.0%), 9,841.33 points (+95.2%), and 11,142.42 points (+117.2%), respectively, in comparison to their closing values on Day One of FY21.

The roller-coaster year that FY21 was, there cannot be a better analogy than the one pointed out by V. K. Vijayakumar, chief investment strategist at Kochi–headquartered Geojit Financial Services. “As FY21—[although] a painful disaster for humanity but, paradoxically, beneficial for global stock markets—comes to a close, there is hope and optimism in the air,” says Vijayakumar.

Even though Covid-19 cases are rising again in many parts of the country, in Vijayakumar’s view, it is clear that in the race between the vaccine and the pandemic, the vaccine would win. The stellar rise in the equity indices alongside the challenging fiscal, where the Black Swan event took full control, can be attributed to unending investor optimism.

The net investment inflows of foreign portfolio investors (FPIs) during FY21, seem to be the ideal flag bearers of this optimism. Between FY93 and FY20, the highest annual net equity inflows of FPIs, worth over ₹1.40 lakh crore, were recorded in FY13. But, FY21 has managed to break that record with net equity inflows in excess of ₹2.74 lakh crore.

Compared to FY13, the growth in FY21 stands at ₹1.34 lakh crore, or 96%. On an annual basis, compared to FY20’s net inflows of ₹6,153 crore, the growth in the latest fiscal gone by is over ₹2.68 lakh crore, or a stupendous 4,361.3% (over 43.6 times higher).

However, at the aggregate level, where net inflows in debt, debt-VRR, and hybrid investments are included, the total net inflows of over ₹2.60 lakh crore in FY21 fell short by ₹16,790 crore when compared to the highest ever total inflows of over ₹2.77 lakh crore recorded in FY15 when net inflows in equity and debt stood over ₹1.11 lakh crore and ₹1.66 lakh crore each.

In contrast, FY21 saw debt outflows worth ₹50,360 crore. Debt-VRR and hybrids saw inflows of ₹26,290 crore and ₹10,238 crore each in FY21, which were respectively higher by ₹18,959 crore (+258.6%) and ₹2,540 crore (+33.0%) compared to ₹7,331 crore and ₹7,698 crore each during FY20.

Coming back to the bourses, benchmark indices apart, the sectoral indices also managed to put up a fairly good show during FY21. Among the 10 key sectoral indices on the BSE, between April 1, 2020 and March 31, 2021, on an absolute basis, the S&P BSE Information Technology index has gained over 14,416 points (+118.9%), followed by S&P BSE Auto and S&P BSE Realty adding over 11,671 points (+110.3%) and 1,347 points (+101.9%) each. However, S&P BSE FMCG and S&P BSE Telecom, respectively, gained over 2,976 points (+30.1%) and 363 points (+39.1%) only.

The good news from India Inc. is that the corporate earnings in Q3FY21 (quarter ended December 2020) continued the strong momentum from Q2FY21, with much better than expected profit after tax (PAT) growth and earnings upgrades. According to Ashish Shanker, deputy managing director at Motilal Oswal Private Wealth Management, for the Nifty50 companies, as against an expected year-on-year (YoY) PAT growth of 7%, the actual growth stood at 22%. “This much awaited earnings recovery is likely to provide a strong tailwind for the domestic stock market which is well and truly marching ahead,” says Shanker.

Also, the government's focus on fiscal expansion and capex spending augurs well for the revival of the long anticipated private investment cycle, Shanker adds. The FY21 earnings per share (EPS) for Nifty50 is expected to grow by 15% YoY, while that for FY22 is expected to grow at 33%. “The shift from unorganised to organised sector has only enhanced over the last year,” says Shanker. “Market leaders within their respective industries are likely to grow stronger and have better pricing power.”

While FY21 has closed with a fanfare, there are strong expectations that global economies would rebound smartly in FY22. “But markets have already discounted this, and valuations are high,” warns Geojit’s Vijayakumar. “But this is unlikely to deter the bulls in the short run,” he adds.

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