The Indian stock market has had a strong bullish run in 2021 driven by factors such as heightened economic activity, high liquidity, and strong earnings growth. However, this doesn’t mean that the market didn’t have its share of surprises in the year.
In 2021 so far, the Sensex has gained 26.4% while the Nifty has gained 29.6%. An analysis of the sector-wise performance of the Indian stock market showed that certain sectors in the market such as information technology, real estate, and healthcare, performed better than others. Overall, investor sentiment was positive, pushing prices further up.
Continuing our Market Round-Up series, in this article, we discuss five surprising major events that affected the stock market in 2021 and shaped the year’s stock market performance.
1. Covid-19 Second Wave
It would be fair to say that the intensity of the second wave left everyone in India and the world shaken. The spread of the second wave caused intense downward pressure on the stock market.
Between February 19th to April 16th, the S&P BSE Sensex corrected by 9.8%. However, the markets proved far more resilient than expected and the Sensex went on to hit a high of 62,245.
2. IRCTC Boom and Crash
IRCTC was having a stellar run in 2021, hitting a record high of Rs. 6393 and taking the overall market capitalization of the company to over Rs.1 lakh crore on 19th October.
However, the stock came tumbling down (around 38% in five days) because of heavy profit-booking caused by the stock being placed on a temporary F&O ban list by the NSE.
The stock faced another crash of 15% on 29th October when the Government announced that it would be taking a share of 50% of the convenience fee revenue of the company. However, this announcement was later withdrawn.
Cryptocurrencies were even more volatile than usual this year. Prices of Bitcoin plunged more than 30% in 24 hours (on 19th May) caused by unfavorable tweets by Elon Musk and the announcement by the Chinese government banning financial institutions from providing cryptocurrency-related services.
But as they say, the very hallmark of cryptos is volatility, Bitcoin and the likes shall always be rollercoaster rides, mirroring the extreme uncertainty the world faces.
4. Fiscal Deficit
The Budget is always expected to affect the stock market, and it does. However, this year marked the best intraday performance of the Nifty on a budget day since at least 1996.
On budget day, the Nifty soared 4.7% while the Sensex made gains of 2,300 points. One major factor that contributed to the optimism was the fiscal deficit target of 6.8% which was the highest since 1994.
Higher fiscal deficit means that spending on critical issues such as housing, infrastructure, and healthcare would be higher.
5. ITC Spike
ITC is such a giant in the Indian stock market that any price movement is watched and noted by investors. While ITC had been continuously underperforming, on 16th September, ITC witnessed a surge of 8.1% in intraday trading.
This sharp spike was caused by reports that the Indian government would allow greater foreign direct investment in the tobacco industry, a sector that provides around 48% of the company’s revenue. This was also taken quite jovially by traders who celebrated the uptick with much-liked memes across social media.
In conclusion, in 2021, the Indian stock markets prevailed over the effects of the pandemic and the resultant lockdowns. Even though the GDP of the country has contracted this calendar year, the performance of Indian stock market has been bullish, thanks to the anticipated resumption in growth.
Surprises and volatility may be seen as an evil, but it’s not necessarily so, especially for traders.
Perhaps, riding through volatility with proper risk controls is what separates successful traders from the lot.
Explore advanced risk controls, automated trading strategies, bulk backtesting and more on PHI 1 – the all-in-one trading platform that can take your trading up a notch!
Enjoyed the read? Watch out for our next article in the 2021 Market Round-Up series.