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4 key stock market trends of 2021

Kumar Shankar Roy | | Updated on: Dec 19, 2021

The stock market shrugged off Covid blues and created wealth for investors. Here’s a review of the performance of the domestic indices, the winning sectors and stocks


If 2020 was a year of tremendous resilience against a raging Covid-19 pandemic, Year 2021 was about converting an advantage to a position of strength. Though a second wave did bring us to our knees, thanks to rising pace of vaccination, the economy opened up sooner, taking baby steps at first, and then giant strides towards normalisation.

Yes, the fear of being caught unawares by an unknown virus variant or an uncontrolled case wave lingers. But, the markets have learned to live with such risks. For domestic stock market and participants who were early to anticipate that Covid wouldn’t be the veritable Armageddon for human kind, the rewards continued to be rich in 2021. Here is a detailed look at how the year shaped up for popular domestic indices, a look at the best performing sectors and stocks as well as the disappointing laggards, and how the stock market wealth creation panned out.

Touching new highs

The Sensex, the popular market barometer, refused to wilt and scored a healthy 21 per cent gain this year (upto Dec 16), continuing the sixth straight calendar year of gravity-defying gains. And that’s just for starters. The bull run ran deep this year, with mid-caps and small-caps joining the party in a bigger way. The BSE Midcap index has gained 41 per cent, almost twice that of Sensex, and only the third time in a decade when mid-caps have outperformed large-caps by 100 per cent in a calendar year.

For those who had the stomach for riskier small-caps, returns were the biggest, with BSE Smallcap index notching up a nearly 62 per cent rise, almost 3 times the Sensex and the second time this has happened in the last two decades.

In 2021, ‘ATH’ or all-time highs gained currency, like in every other bull market. The large-cap-based Sensex hit its ATH as many as 52 times out of the 239 trading sessions this year so far. This was a broad representation of what was happening underneath, where stocks of all sizes and shape were finding new takers. As a basket, large-caps i.e. the 100 biggest stocks in terms of market cap, saw 78 per cent of them hit respective all-time highs this year. So, it doesn’t matter if you held RIL, TCS, HDFC Bank, Infosys or SBI; bulls pushed most of them towards uncharted territory in the stratosphere. Only ITC shareholders will hold a grudge, because their ATH, hit in July 2017, is still some distance away.

In the mid-cap space i.e. 101st to 250th in mcap, 69 per cent of stocks — including Gujarat Gas, Cholamandalam Investment, Page Industries, Balkrishna Industries, HAL, and ACC — zoomed to their all-time highs. Do note, a section of mid-cap PSUs are yet to revisit their ATHs.

The buoyancy in small-caps was unmissable as well. Nearly 5 out of 10 small-caps, such as TTK Prestige, DCM Shriram, Radico Khaitan, Manappuram Finance, and Welspun India, hit life-time highs in 2021 and that is quite a feat given the considerably large universe in this low-liquidity bucket of the market.

For those investors investing purely based on valuation metrics such as Price to Earnings (P/E), 2021 threw up a mixed bag ( see table ).


The Aatmanirbhar Bharat effect

Till sometime ago, the popular narrative for rising Indian markets has always been FPIs (Foreign Portfolio Investors). But 2021 has been different by that yardstick. In 2020, FPIs poured in ₹1.7 lakh crore in equities, with overseas investors clocking net inflows for 10 of 12 months. In fact, this was the highest FPI inflow in one calendar year ever!

But the FPI mood soured considerably in 2021, with around ₹31,000 crore being pumped in, with 6 of 12 months witnessing net outflows.

You can blame the Fed tapering, historically high valuations or simple profit-booking by the foreign hand. But the resilience shown by domestic equities has bamboozled all and sundry. This was possible due to the massive show of confidence by domestic investors, either directly or indirectly through institutions. Call it the Aatmanirbhar Bharat effect! Of course, it remains to be seen how the desi shield holds up against relentless foreign selling.


In 2021 FPIs when sold in the cash market, the blow has been softened by Domestic Institutional Investors (DIIs). For instance, FPIs sold stocks worth ₹26,000 crore in cash segment in December 2021 while DIIs bought over ₹20,000 crore. In November 2021, when FPIs sold ₹39,900 crore, DIIs bought ₹30,560 crore.

Latest shareholding data also confirms the same trend. FPI ownership, in terms of value, fell by 128 basis points (bps) from 22.75 per cent in December 2020 to 21.47 per cent in September 2021. During the same period, DII ownership fell marginally by 44 bps from 13.56 per cent to 13.12 per cent. At the same time, retail investor holding jumped by 23 bps to 7.13 per cent, from 6.90 per cent.

The sharp rise in investor/demat accounts, necessary to trade in stocks, also corroborates the changing market dynamic theory.

With an average 24 lakh accounts opened per month in January-October 2021, money from 738 lakh accounts is flowing into shares with unprecedented enthusiasm amid interest rates in bank FDs, the staple investment option for households, at historic lows.

As per BSE-registered investor count, the overall national growth in the number of stock market investors has been around 55 per cent, with States such as Assam, Telangana, Madhya Pradesh, Rajasthan, Uttar Pradesh, Chhattisgarh, and Odisha showing faster growth than the pan-India average. The list of States/UTs with highest number of investors is led by Maharashtra, Gujarat, Uttar Pradesh, Karnataka, Tamil Nadu, West Bengal, Delhi and Andhra Pradesh ( see table ).


Old is gold

As the world limped its way back to pre-Covid mood, old-economy sectors caught attention in 2021. Otherwise, who would have thought that Power would be the best-performing sector this year?


While 2020 saw Healthcare and IT emerge as the life blood of our Covid-ravaged lives, the best-performing sectors/industries of the stock market this year (up to Dec. 16) were Power (up 74 per cent), Metal (up 69 per cent), Basic Materials (up 62 per cent), Realty (up 58 per cent), Capital Goods (up 52 per cent), and Infrastructure (up 48 per cent). IT still managed to pile up 46 per cent gain even in 2021, but Healthcare (up 15 per cent) was at the very bottom along with FMCG (up 8 per cent) and Banking (up 16 per cent).


Not a single sector/industry index (in BSE) clocked negative returns in 2021, a rarity. In recent bullish years, there were always a handful of segments in the market that fell out of favour such as Oil & Gas and Bankex (2020) and Metals & Autos (2019).

The power index was led by massive gains in Adani Transmission, Indian Energy Exchange (IEX), Tata Power and Adani Power stocks. NTPC, KEC International and NHPC were laggards, but each delivered double-digit percentage returns. In the Metals pack, APL Apollo Tubes, Vedanta and SAIL were the standout performers. Sobha, Mahindra Life Space, Brigade drove the gains in Realty space — Phoenix Mills, Sunteck and Godrej Properties ranked at the bottom even after clocking decent gains for 2021 so far. Capital Goods sector saw spirited stock performance from Grindwell Norton, Carborundum Universal and SKF India, while AIA Engineering was a laggard.

IT, a favourite in 2020 as well, saw KPIT Technologies leading the way, followed closely by Happiest Minds Technologies, Tata Elxsi, Persistent Systems and Mindtree — all with a minimum 200 per cent gain for 2021 alone!


In terms of industry/sector laggards, FMCG, Healthcare and Banking were at the bottom. An 8-odd per cent rise in FMCG isn’t bad after it had notched up 13 per cent gains in 2020. While the broad FMCG space performed okay, large-caps such as HUL, ITC, Nestle, and Britannia were quiet in 2021. Healthcare, the star of 2020, showed consolidation this year with big names such as Sun Pharma, Divi’s and Apollo Hospitals doing well while Dr Reddy’s, Biocon and Lupin had a forgettable year. Banking was a mixed bag, with ICICI Bank and SBI doing well but the likes of HDFC Bank, Kotak Mahindra and IndusInd quiet.

Best and worst

If you look at the BSE Allcap index that has about 1,060 stocks, investor wealth increased by over ₹65 lakh crore or 35 per cent in 2021. As many as 87 of the top 100 stocks, in terms of mcap, have clocked positive returns. The rest 13 have dropped by up to 20 per cent. Investor wealth gains in large-caps stood at ₹44 lakh crore. The best performing large-cap stocks — Adani Total Gas, JSW Energy, Adani Transmission, and Adani Enterprises — gained between 200 and 400 per cent. The laggards include Hero Motocorp, HDFC AMC, Dr Reddy’s Labs, ICICI Lombard and Kotak Mahindra Bank.

In the booming mid-cap space, the gains were bigger though the share of gainers (126 of 150 or 84 per cent) was similar to large-caps. The best performers in this 150-stock list were Brightcom Group, Tata Teleservices Mah., and Trident. The worst performers in this space include Bandhan Bank (down 34 per cent), YES Bank (down 30 per cent), and Aurobindo Pharma (down 24 per cent). The investor wealth gains added across mid-caps in 2021 stood at ₹12.5 lakh crore.

Small-caps form the largest basket in BSE Allcap, with over 800 stocks, and about 85 per cent reported gains in 2021. The investor wealth addition in small-caps was about ₹9 lakh crore this year. Given that small-caps are most risky in cap spectrum, the number of stocks that have doubled since 2020 stood at over 200. Best performers include GRM Overseas (over 1,400 per cent), RattanIndia Enterprises (over 700 per cent), and Nahar Spinning (over 500 per cent). Small-cap stocks that destroyed investor wealth in 2021 include Ujjivan SFB and Ujjivan Financial Services (50 per cent drop each).

With 2021 a fabulous year overall in terms of returns, newly-listed stocks (listed in the one year up to December 2020) did good. Of the 14 newly-listed stocks on BSE mainboard, 9 beat Sensex’s gains in 2021. The best performers were Happiest Minds, Angel One, UTI AMC, Route Mobile and Equitas SFB.

Penny stocks, those with a price tag of below ₹10, are popular amongst certain retail investors even though these are highly-illiquid counters with often weak fundamentals.

Out of the 600 penny stocks (priced below ₹10 in 2020 end), about 540 or 90 per cent gave positive returns in 2021. The biggest gainers in this went up by at least 2,000 per cent and include Adinath Textiles, Radhe Developers, Digjam, and Chennai Ferrous. Do note that penny stocks such as Sagar Productions, Trio Mercantile, B.C. Power, Chandrima Mercantiles, and Ishaan Infrastructures, have lost 40-60 per cent value in 2021 so far. This should serve as a cautionary tale for investors wanting to punt on lesser-known names.

Published on December 18, 2021
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