We at VRIDHI Investment wish you all a Very Happy, Successful, and Profitable New Year 2021. Hope the new year turns out to be as good as 2020 and also hope it does not!
In fact, the year 2020 itself was quite a confusing year for most investors, and we feel that the new year 2021 will also keep investors in a state of confusion. This is the reason we wished it as Happy Confusing New Year. We at VRIDHI would be happy if the year turns out to be just confusing, we are well equipped to sail through the confusion. What worries us is that the year 2021 may also fool many investors. We will discuss all these below.
The year 2020 has left most of the people perplexed and confused. It started with Covid, luckily it has ended with vaccinations insight, but the start was a disaster. March was the peak at pessimism, the naysayers and the negative people were having a gala time. At the peak of pessimism, we at VRIDHI gave a call to invest in keeping positive things in mind. If you all remember, I wrote an article titled ‘Sell that house you own and invest in shares‘
Many people did invest after that article as they believed in what we said, some even trolled us saying we will make them sell their house and bring them on the road. What happened then is known by all. The trolls are quite now. To be frank, even we did not expect this kind of rise in the indices. We did expect things to settle and believed that those who invest would make money, but even we didn’t expect this phenomenal rise. The year 2020 was full of surprises. One point to be noted… I wrote it as ‘rise in indices’ and didn’t write it as rise in the market. I will discuss this more.
Observe the table below
Let’s see why was 2020 a surprise year. The above table shows the returns from 1-Jan-2020 till the peak pessimism day 23-Mar-2020. The Returns of indices were on the average 35% negative. You will see Gold to be positive, as Gold becomes the run to investment during uncertainties.
When no one thought that the market could rise again, the central banks’ liquidity infusions globally did the magic. The money taps got opened and started coming into the markets worldwide. Thus the bottoms to the end of Dec returns averaged 80% and above.
Hence, the first surprise of 2020 was that the indices rose faster than anticipated by anyone. Second, people think that the markets gave huge returns in 2020, but if you look at the calendar year returns, you find around 15% on the bigger indices. Though good returns, they don’t show over-exuberance.
So why do I write that indices were up, not the whole market? Since Jan’2018, the Mid and Small Cap segment has been struggling. Though the indices have gone up, not all portfolios are up since these stocks were laggards. That seems like would change now. Over the last week, the broader market has started doing good. The trend may continue if the funds keep flowing in. The market will keenly watch the upcoming Budget.
The year 2021 can be confusing too. People who were waiting for correction have the left-out feeling. They are wondering about jumping in now or not. We at VRIDHI would advise exercising caution while investing. Certain sectors and some stocks do not justify the rise, and hence any correction can take them down severely. We saw one sample last week when the Sensex and Nifty fell around 2000 and 500 points respectively.
Though the rise is beyond expectations, the year 2021 will keep investors confused as the good news is coming out one after the other. Vaccinations dry run has been completed in India too. Most countries have given approvals to the vaccine. People worldwide are frustrated; they need freedom – if the world tends to become normal once the vaccine works, we will see people worldwide, spending tons of money on various things. This can start the consumption boom again.
So how much correction will make me happy? I feel 5000-6000 points on Sensex from here can be a great entry point for investors having the left-out feeling. Does it mean you should sell and keep cash? Don’t commit that mistake, 2021 can fool us severely. Personalise the portfolio as per your needs. Best is to contact your adviser and take his help.
Will come up with more info and details in the next article. Do follow the website and our various social media handles.
Have a great 2021