Year 2021 will go down the memory lane as one of the best years for investors. It won’t be wrong to call it “Year of Equity”. Despite the continuing pandemic, the good times kept rolling in for the stock markets during 2021 across the board.
Every segment of the market—large-cap, mid-cap or small-cap—and companies across sectors posted handsome returns for investors. This elevated the market sentiment, which in turn led to mutual fund schemes gaining the most, especially those funds that are well managed.
Almost all equity funds took advantage of the upbeat market scenario, to the benefit of their investors. Superior returns from the equity markets acted as a catalyst, attracting many new investors, especially young investors, to get a feel of the equity market. Many millennials and Gen-Z investors joined the market and enjoyed the equity party, either through direct equity investments or through the mutual fund route.
How The Markets Fared
The Indian markets created history in 2021, hitting one milestone after another. Among the broadly tracked indices, the BSE Sensex surpassed the magical 60,000-mark on September 24, 2021, while the Nifty surpassed the 18,000-mark on October 11, 2021. The Sensex returned 21.26 per cent (year to date) while Nifty returned 23.36 per cent between January and December 17, 2021.
The mid and small caps beat their larger peers by wide margins. On the back of upbeat sentiment, easy liquidity, speedier Covid-19 vaccination and economic recovery, the Nifty Mid-cap index delivered almost doubled of what Nifty returned—43.60 per cent. The Nifty Small-cap index delivered a huge 55.60 per cent returns in the calendar year 2021.
Among sectors, metals stole the show with 68 per cent returns, followed by IT with 51.12 per cent returns.
The up-move in the markets in 2021 was exceptional, considering the spread of Covid and subsequent restrictions. Equity remained the blue-eyed boy for all sets of investors.
Rising Demand in Demat
The astounding rise in new demat accounts is a clear reflection of how 2021 was. In financial year 2021, 1.42 crore new demat accounts were opened; the highest ever. This number is almost three times the figure in the previous financial year and bears testimony to investors’ interest in the stock market and investing.
When we dig deeper into the number, there are surprising revelations; things that have never happened in the history of Indian stock markets. Let’s look at the number closely.
As per data from India’s largest depository, Central Depository Services Limited (CDSL), it took more than 15 years to cross the 10 million-mark in demat accounts. It took another 4.4 years to double the number to 20 million. Till March 2021, this figure had grown to a huge 33.4 million. The pace became even faster during the year and as of December 17, 2021, it has ballooned to 52.3 million.
This means that CDSL added more than 20 million accounts in calendar year 2021 alone, which is more than the total number of accounts added in more than 20 years of the company’s existence.
Flood of IPOs
On the back of market euphoria, India saw a flood of initial public offerings (IPOs) in 2021. IPOs remained a buzzword on Dalal Street this year. A flurry of IPOs, from various new-age technology-driven and emerging sectors, hit the capital markets. The majority of them got an overwhelming response from retail and institutional investors. Some even got bumper listings on the stock exchanges.
Many big names such as Paytm, FSN E-commerce (Nykaa), PB Fintech (Policybazaar), Sigachi and Sapphire Foods (KFC and Pizza Hut) got listed recently. Fifty-seven IPOs have been listed so far and a few of them are about the get listed in next few days.
The new fund offer (NFO) market also remained hot throughout the year with more fund houses joining the race. The last time such a flurry of NFOs was witnessed was in 2014-15. More than 100 NFOs were launched this year. But unlike in the past, this time fund houses were focusing on either index funds or exchange-traded funds (ETFs), which have surpassed NFOs in other categories so far this year. Global fund of funds (FoF) was the other category that has seen the maximum launches so far this year, after index funds and ETFs.