MARKETS SET FOR BEST GAINS IN A DECADE DESPITE COVID

MUMBAI: Despite Covid-induced turbulence, Indian stock markets are set to see their best performance in a decade in 2020-21. During the financial year, which ends on March 31, India’s benchmark index Nifty has gained over 65% so far. Data showed that in FY20, Nifty ended 26% lower mostly because of the crash in March, as the Centre had announced a complete lockdown in the country in the last week of the financial year.

This compares with a 73.76% rise in FY10, while in the remaining nine years since then, Nifty has seen a maximum yearly increase of 26.65% in FY15. If markets continue to maintain the rally, gains in FY21 may even top the previous best of FY10.

However, what is different in the market rally in FY21 is the lack of support from domestic institutional investors (DIIs) and weak economic macros.

Unlike the FY10 rally, where DIIs also contributed to positive flows along with the high level of foreign institutional investors (FIIs) inflows, the current rally has seen consistently opposing flows from FIIs and DIIs. In FY21 so far, FIIs have pumped in nearly $30 billion in Indian shares while in FY10, it was $7 billion of foreign money. However, since the beginning of fiscal 2021, DIIs are net sellers of ₹1,12,944.81 crore while in FY10, they invested ₹24,191.85 crore. “Mutual funds did contribute to outflows during FY10 and it was overall DIIs, which contributed positively,” Vinod Karki, Siddharth Gupta, analysts at ICICI Securities, said in a note on January 8, adding that in 2021, Nifty has shown the fastest rally since FY10. On a rolling nine-month basis, the Nifty gained 86% from its lowest point in the year, close to exhibiting the fastest rally since FY10 when it gained 103%.