The momentum of the markets seen over the past few months is likely to continue on strong global cues, continued overseas inflows and macros trends improving. Indian markets opened the year 2021 record highs on Friday. Economic recovery in the coming year and an expectation of earnings improvement have strengthened the overall investor sentiment. The Nifty finished at 14,018.50, up more than 14,000-points for the first time, at 36.75 points or 0.26%. The BSE Sensex gained 117.65 points or 0.25% to close at 47,868.98.
Most global markets were closed for the New Year holiday, but fresh US stimulus, overall widespread positive sentiment on the back of the Brexit deal, and the expectation that the vaccine roll-out would bring a better day.
Siddharth Khemka, head of Motilal Oswal Financial Services Ltd, said, “The Sensex has gained its longest week since April 2010 in its ninth week.” Khemka said the markets seen in the last few months are likely to continue to witness strong global cues, continued foreign inflows, and macro trends. He said the December quarter results and the Union Budget would be some important events for the market.
The stock market sentiment was also affected by the record Gross Goods and Services Tax (GST) collection in December, suggesting a continued improvement in economic activity and a gradual return to normalcy. According to the Union Finance Ministry, GST collections touched 15 1.15 trillion last month, the highest since the implementation of the new tax regime.
Despite high volatility and economic downturn, Indian markets ended with gains of 15–16% by 2020, while BSE Midcap and BSE Smallcap outperformed, rising 18–29% during the year.
According to Jaydeep Hansraj, managing director and CEO of Kotak Securities, markets may behave differently in the first and second stop of 2021. “We can expect the Nifty to move anywhere between 14,000 and 15,000 in the first quarter of CY21. After the budget and Q4 results in the season, we expect the markets to improve in some sort of consolidation phase and witness time. “
Analysts said abundant liquidity, low-interest rates, and capital outflows are likely to support markets. He said, however, there could be a risk of steep valuations for the overall rally in Indian markets.
HDFC Securities managing director and CEO Dheeraj Reilly said that the continuation of low or zero interest rates globally could drive further pricing for the world.
Reilly said that a large part of the markets are gone and from now on, its rise (if sufficient) will be gradual and measured. “In the interim, we may see improvement bouts, especially if the FPI dries up for a few days/weeks,” he said.