Hello👋 Its the year end so with Market snapshot we summed up the major events happened in equity markets & economy in 2021 followed by interesting visual & curated reads.

1. Market snapshot

An eventful year is nearing a close and let’s take a stock of sector wise performance. The markets ended on a flat note for the week. Continuous resilience of the IT sector (up  2.9%) made for the selling pressure in Power & utilities, Financials & Consumer discretionary, which were down by 2.5%, 1.8% & 0.8% for the week.

For the year 2021, the overall markets saw 33% returns. Old economy sectors such as Industrials and Power were the top gainer at 63% and 82% respectively, while Pharma and Consumer staples (FMCG) were the underperformers at 14% and 16% respectively. 

Sub-sector performance: Winners & losers  

In the above visual, we can see that in the last 1 year, overall textile category has seen the highest market cap returns of 95%. Interestingly, Telecom delivered returns of 36% and outperformed larger categories such as FMCG-retail, Pharma-healthcare & Banking-financial (lending) sectors. The underperformance of Banking despite great returns raises an important question – is market factoring increasing competition from Fintech and Global tech which have potential to eat away profit pools.

Building materials delivered returns of 82% outperforming Real estate that delivered 54% returns.

2. Summing up 2021 for Equity markets…

2021 was the year when investing (and speculation) went mainstream in India. This is easily visible by observing the dinner table or the gym conversations:

• 2016: Politics, cricket and Bollywood
• 2021: Stock market, crypto and start-ups

2021 was the year when traditional forms of entertainment – Bollywood and cricket gave way to “entertainment via investing” (not a great sign). Cinema halls were closed for large parts and well India lost to Pakistan for the first time in a World Cup. Quite a downer right!

Let’s recap some key events in the economy & markets during the year: 

(i) Macro economy

• GDP declined by 7.3% YoY in Mar’21 at 135  lakh crs compared to 145 lakh crs in Mar’20. In Q2FY22, GDP grew by 8.4% QoQ (32.97 lakh crs in Q2) which is the 4th consecutive quarter where GDP has been positive after a degrowth in 2 quarters. 
  
• Sensex made new highs 51 times which is the highest since 2008!

• The Market Cap to GDP ratio in 2021 has remained at multi-year highs. 

• In August, the government announced National asset monetization of 6 lakh crs to improve GDP multiplier, to give a push to capex cycle, drive credit growth & decline debt to GDP ratio. We covered a detailed note on the same here. 

• Interest rates: Fed has kept the interest rates at all time lows i.e. ~0-0.25% to focus on inflation rather than growth and indicated that there might be interest rate hikes too. To know more in detail, click here.
  
• RBI & Monetary policy committee (MPC) kept the interest rates- repo, bank rate & reverse repo rate unchanged for the 7th consecutive time. To know more in detail, click here.
  
• Government came up with a PLI scheme of over 2 lakh crs which might lead to incremental revenues of upto 30 lakh crs. This can be the single biggest revolution in India’s manufacturing economy and is likely to create new profit pools for investors to look at.

• FPI flows increased till Sep ’21 but have been declining since the last 3 months. Majority of the FPI flows have been towards retail, Insurance & telecom sectors. 

(ii) Commodity bloom

• Rise in fuel prices- petrol prices reached Rs 100/litre, Oil prices at above 80$barrel, reaching a 7 year high.

• Coal prices reached its all time high and tripled in the last year. To know the reason, click here. 

• Prices of metals like steel, aluminium, iron ore etc. have reached its highs since last one decade. As this constitutes raw material for many industries like automobiles, the WPI is at its highest levels currently. Find out the chart here. 

(iii) Sector highlights

• The Mid-caps and Small-caps have given very high returns (up 2x and 3x v/s Sensex) in the last 1-2 years. 

• Metals (for the first time since 2016) & IT were the best performing sectors in 2021. 

• Pharmaceuticals- Healthcare, FMCG & banks were the worst performing sectors in 2021.

• After so many years, finally, in the telecom sector we can see the signs of revival. Companies have taken tariff hikes to improve the ARPU’s which will help them to invest for the infrastructure of new technologies. Find the detailed explanation here. 

Check out how from incurring losses, Bharti Airtel generated ~4% PAT margin in Q2FY22:  

• Companies in the automobile sector were impacted due to global semiconductor shortage. We can expect this issue to normalize slowly in the upcoming months. 

• PSU banks are generating big profits again! For context- SBI’s quarterly profits (8,890crs) were higher than Kotak’s revenues i.e. 8,226crs. 

• Paytm came up with India’s largest IPO in India of ~18,000+crs in 2021. With the IPO, came the controversies as well. To read a different perspective on Paytm, click here. 

• Pharmaceutical companies with US exposure, aftering seeing best times in 2016-17, have suffered in 2021. To know the reason, click here. 

• There are many key themes like Renewables which might play out and also there are new key developments in the power sector which might help the industry to stop bleeding, especially- discoms. To know more in detail, click here and here.  

(iv) Crypto went mainstream last year!

It is no secret that Indians have latched onto Crypto bigtime with over 10 cr Crypto investors (more than equity investors!). PS: We don’t want to trigger your FOMO but look at those returns! 🙀

3. Good reads of the week:

3.1 A good read on why Value investing works & will continue to work by Lyall taylor. 

3.2 An excellent write-up by Anand Sridharan on Power to the Absurd.

3.3 A thread on how valuations of Razorpay rose to 7.5Bn$ in just one year. 

4. Multipie interactions of the week:

There are many interesting insights shared, questions answered & memes posted by the community on investing, personal finance, market & company updates exclusively on Multipie platform.

Some select highlights:  

1. Do you think a combination of global diversification and tax-friendly is possible? Well, PPFAS helps you enjoy the capital gains tax benefits along with diversification. Read more here.

2. Knowing the importance of health insurance is just the starting point. A step forward – and an important one – is the selection of an ideal health insurance plan. Here are the 8 features you must compare before buying one.

3. What if you could take advantage of a fall in the value of the asset in the portfolio? Check out a few nuggets on Tax-Loss Harvesting!

Going through company conference calls is equally important as deciphering financial statements. They help you understand how the management is performing, the company’s vision, growth outlook and statements by the board members on controversies.

Read on the select insights from earning calls of Havells, Century Plyboards, SIS, Castrol, Cummins, Goldiam International and Affle India.

Hop on and download the app by clicking here if you haven’t yet!

That’s all for this week. Please share with your peers if you found this helpful and subscribe to start receiving the weekly digest in your mail! Happy weekend!