Will the rally last this year?

Hard-hitting valuations, the likely normalization of monetary policy from early 2022, and potential short-term disruptions to the economy from the covid-19 pandemic could be headwinds in the first half of this year. However, equities should outperform bonds and cash, but with more modest returns. But earnings growth expectations, the main driver of mid-cycle stock returns, remain strong and improvements are likely. Consensus expects earnings per share (EPS) for the Nifty Index to grow at a compound annual growth rate (CAGR) of 16% for FY19-23, compared to 4% for FY12-19 .

Will liquidity continue to pump the markets?

Markets are expected to feel the pressure of liquidity constraints in 2022 if the easy money supply of global central banks begins to dry up. So far, major central banks have purchased assets to provide currency and maintain financial conditions conducive to economic recovery. Now they should start cutting back on their purchases. Foreign Institutional Investors (FIIs) bought Indian stocks for $ 3.86 billion in 2021, but were net sellers for $ 4.70 billion in October-December. Domestic institutional investors were net buyers of stocks worth ??97,109.66 crores in 2021.

What about other asset classes in 2022?

The depreciation of the rupee will support domestic gold prices, but this could be contained given the Reserve Bank of India’s (RBI) foreign exchange reserves, the possibility of a balance of payments surplus, continued flows of Indian stocks, initial public offerings (IPOs) attracting foreign investors, and India’s potential inclusion in the global bond index in 2022, analysts said.

Will primary markets continue to shine?

The IPO pipeline continues to remain strong with 35 companies expected to raise around ??50,000 crore and 33 more pending market regulator approval to raise approximately ??60,000 crores. In addition, the highly anticipated mega-IPO of Life Insurance Corporation of India is expected this year. In 2021, a record ??$ 1.18 trillion was raised through 63 public offerings. It was almost 4.5 times the ??26,613 crores raised thanks to 15 share sales in 2020 and almost double the best previous year 2017.

How did Indian stocks behave in 2021?

Markets have been on a roller coaster ride driven by global tailwinds and optimism about India’s growth. Among emerging markets, India has established itself as a preferred destination for global investors. Stocks posted the sixth consecutive year of gains, with Sensex and Nifty gaining 22% and 24%, their best since 2017, when both gained 28%. The BSE MidCap and SmallCap indices gained 39% and 63%. The total market capitalization of Indian stocks reached $ 3.42 trillion, up from $ 2.52 trillion at the end of 2020.