Nifty 50 performance in 2021

We are in the last few days of 2021 which has been a phenomenal year for investors. NIFTY has delivered 24% returns YTD. Since 2015, it is the second-best year in terms of gains (2017, NIFTY returns were 28.65%). 

Here are the top Nifty gainers and losers who drove the market over the year.

Tata Motors and Hindalco were the top Nifty gainers this year. Tata motors share price surged after the buzz around EV launch and reports of potential billion dollar investments in its EV segment from investors.  The company has also reported better sales growth over the year compared to its peers. On the other hand Hero MotoCorp and Kotak Bank were the top Nifty losers. Demand for 2Ws continued to remain tepid in both urban and rural pockets in 2021. Higher fuel prices and covid fears restricted the pace of recovery.

All sectoral indices rally over the year. Here are the top sectors that dominated the markets over the year:

Top Gainer: Nifty Metal was the leader, rising more than 70% in the best performance since 2009. All the 15 constituents of the Nifty Metal Index advanced, with five gaining over 100%. Rise in infrastructure development and automotive production are driving growth. Power and cement industries are also aiding growth for the sector. Demand for iron and steel is set to continue given the strong growth expectations for the residential and commercial building industry.

Least Gainer: Nifty Pharma was the worst performing sector in 2021, but ended with a second straight year of gains. India enjoys an important position in the global pharmaceuticals sector. According to the Indian Economic Survey 2021, the domestic market is expected to grow 3x in the next decade. Going forward, better growth in domestic sales would also depend on the ability of companies to align their product portfolio towards chronic therapies for diseases and vaccine demands.

Now that we are moving into a new year, investors are looking for sectors where they can invest the money for maximum returns. We will cover the top three sectors.

Top 3 sectors to look out for in 2022:

Banking/Financials 

• The financial sector is looking really attractive at present with all the FII selling in the recent past. Some of the top banks are trading at a fair valuation.
• Bill for Privatization of public sector banks is expected in the next budget which will be a positive move for the banking sector overall.
• For the banks, there is a decline in credit costs because of improving asset quality. It will lead to improvements in profitability - better results for the banks will drive the share price up.

Information Technology

• It is one sector that has continuously been delivering good returns to investors led by digitization. The Nifty IT Index rose over 58% in its best performance in 12 years as work-from-home became a norm.
• Most big companies want to move to the cloud. As per data available, only 25% of companies have adopted Cloud so far. The remaining 75% will roll out contracts in 2022 and can bring in more business for Indian IT companies.
• Most companies in IT sectors are at high evaluations but the earning visibility is quite good.
• The rupee is expected to become weaker in 2022 which will increase the profitability of these companies in dollar terms.

Automobile/EV

• The automobile industry expects a continuation of healthy demand along with the easing of semiconductor supply issues in 2022.
• The Industry is expected to do well with the favorable policies of the government. For instance the PLI schemes for the auto and auto component sector, advanced chemistry cell, extension of FAME-II scheme till 2024.
• The announcement of a PLI scheme of Rs 76,000 crore for semiconductor manufacturing will provide the much-needed fillip to the industry.
• The momentum on the EV side would be better with companies wanting to invest in battery cells and vehicles. Of the Nifty 50 stocks, Tata Motors Ltd. was the top gainer this year as it rose over 160%.

Expectation from 2022

• Most experts believe the overall returns from 2022 will be moderate. 
• New variants and rising interest rates will not help the market overall as it had in the last two years.
• There could be corrections because of the above factors which investors should take as buying opportunities.
• As a result, investors should invest with a long-term investment horizon. They should look for segments and stocks that can beat the market.