Indian Stock market had a rapid swing attack in 2020. By far this year has been the most volatile year in the history of Indian Stock market. The market has 4 major pillars named :- Nifty50, Bank nifty, Mid cap and Small cap stocks. These are the 4 factors driving the market momentum.
In the beginning of 2020 the Indian stock market achieved new highs and almost all the stocks reached their all time high prices. If we look behind Nifty reached almost 12300 levels in January 2020 and Bank Nifty was 32465. Today Nifty is sailing at an all time high of 14000 and Bank Nifty has almost reached its high again at 31300.
Due to the virus effects, the entire nation went into lockdown all of a sudden. This caused high value degradation of the entire stock market. The stock market crashed like never before and within three months from all time highs i.e from January to March crashed for almost 50%. The nifty that was trailing at 12200 levels reached 7000 and Bank Nifty took a hit of 16000 points and reached 16500 levels. Due to this there was a bloodbath on the Dalal Street and this caused loss of tons of crore Rs. to the investors and traders. The news came in on 22nd March for nationwide lockdown and as an immediate effect to it the markets slumped and resulted in a crash on 23rd March, 2020.
The reason for the crash was very simple. It meant a sudden blockage in the Indian economy and business activities and transactions. No longer were any shops or malls or Business mills or Business houses open. All the businesses were shut except medicinal business. Also some limited permit was given to local Kirana shops but that happened after a long time as well.
Corona spread was so dangerous that not only Indian but the entire world’s economy suffered from heavy crashes and degradation in value. This resulted in heavy outflows of cash from the market making it hollow from inside.
FII and DII data
FII (Foreign institutional investors) cashed out almost 90000 crore Rs. in the January – April 2020 period. On the other hand DII supported the market but the cash inflow was not constant and people were in panic which resulted in market crash. DII supported the market with an inflow of 70000 crore Rs. but they did not maintain the buying capacity resulting into market downfall.
Later on in the quarters ahead of lockdown the FII immediately came into action and pumped in more than 100000 crore Rs. of capital back into Indian markets which is the primary reason for market reaching at all time highs today. In between during the September month the economy was afraid of a second lockdown hence the markets reached almost 10800 levels but later on it recovered like a shooting star and due to FII support and constant growth in Indian company’s valuations (specifically IT sector) the markets boomed out.
During the lockdown situation there was a very unusual and fierce situation created globally. The price of crude oil went negative which resulted in slumping of the world economies. Crude is the base of majority products that we use. Plastic, Metals, Petroleum, Gas etc all are somehow related to crude. Crude is the base for deciding the pricing of major commodities available in the market. The situation created a halt in airplane facilities and transport industry majorly. Hence the use of crude oil came to a halt. This resulted in shortage of storage space for crude oil barrels. Crude oil production was decreased but it can never be stopped hence the oil extracted was running out of space.
This meant that the supply was much more than the demand. Hence Crude went negative and markets reacted to it. However due to Saudi nations and Russia’s constant efforts the production capacity has been stabilized today and crude prices have almost recovered a lot from their negative price range.
The term market swing is utilized as the market was 12000 in January 2020 and reached to a bottom of 7000 in March. Then it recovered 50% from there and is now trailing at 14000 levels. This means that the market has given a value addition of net 2000 points in this very year which is a drastic change.
From 2010 the market has given movement form 6000 levels. And today at the end of the 2010-2020 decade they have reached 14000 levels.
All the sectors suffered heavy losses be it petroleum, mining, pharma, agriculture, Finance etc. Some sectors suffered heavily while some took a minor hit. The majorly affected sectors were transport, aviation, finance, apparels and luxury products and petroleum. All this is the result of virus spread and nation security from major loss of lives.
Stock Market Trading Accounts
There was a sudden spike in the number of DEMAT accounts in India. People had their businesses closed hence trading was the only source left for earning. The online discount broking infrastructure helped such people in performing daily trading transactions. Indian discount brokers benefitted the most from such lockdown situations. The number of trading accounts increased approximately 25% from the previous year and is still booming and increasing. The reason is people have understood the concept of investing due to such blockage in the economy.
Banking News, IPO and Deals
Bank moratorium was the major concern during the entire year of 2020. Till date the decision is not made regarding the 6 lakh crore Rs. claim. Also there was a major suggestion by the RBI panel to convert big finance companies and eligible business houses into banks. The aim was to balance the financial aspects in India and create a risk free portfolio for banks and decrease the NPA ratio.
There are a lot of IPOs that came in the year. Many launched successfully and many bottomed out in the very beginning. SBI cards IPO was one of the biggest failures due to the lockdown situation. On the other hand, IPOs like Happiest minds, Route mobile, Mazagon shipyard, Cremica and Burger king were hits but it is to be seen how long their winning rally survives.
This year witnessed many deals for Indian companies from national and international MNCs. The major company in news for it was Reliance. It got a lot of deals for JIO network and Retail outlets. TCS also acquired many companies and got stake in many startups and big companies. Majorly the IT companies dominated the 2020 run of NIFTY where Infosys crossed 1000 Rs. in valuation and stocks like Wipro, HCL tech etc. almost doubled valuations.
Also there were movements like farmer’s protest for farm bills which are unresolved till date and are affecting the agricultural sector handsomely. This is causing a daily huge loss for the Indian Industry.
Forecast for 2021
All of us know that India is trying to achieve its dream of a 5 trillion dollar economy. It is by far clear that FII trusts the Indian future and are investing heavily in the Indian companies. It is also seen that all the stocks have reached their highs. But stocks are still not satisfied by this price surge.
Also due to profit booking from the investors and a new strain of virus the market tanked 1000 points and bank nifty tanked 2000 points in 2 days. Hence it is viewed that 2021 will be good for investors but if a person is involved in trading, he or she should have the patience while such dips occur.
It is said that there is no constant growth so there would be many dips in the market. But one who survives such dips will receive the fruits of the booming markets of India. It is said that Indian Economy will increase by 3-5 times in the upcoming years. Hence investing in India is always a safe bet in current times.