Vaccine, geopolitical trends to be major drivers for markets in 2021

The covid-19 situation, union budget will further guide investor sentiments

New Delhi: The global Covid-19 situation, rollout of vaccines, geopolitical trends, Union Budget and economic recovery would be the major factors driving investor sentiments in 2021 after a tumultuous year which saw both 'the worst of times and the best of times' for the stock market, said analysts.

What a year 2020 turned out to be! From witnessing gigantic losses to record-shattering gains, investors went on a roller-coaster ride amid the coronavirus pandemic and massive stimulus measures. Markets closed last year with remarkable gains of around 16 per cent, but will the winning ways continue in 2021 as well? According to Hemant Kanawala, Head - Equity, Kotak Mahindra Life Insurance, "If 2020 was a year of Covid infection, lockdown and recession, 2021 will be a year of vaccination, reopening and recovery."

Analysts are optimistic about the road ahead for the equity market but added that the quantum of rise would depend on multiple factors. Markets may see profit-taking ahead followed by consolidation initially but analysts expect the prevailing uptrend to continue in 2021 as long as there is no resurgence of Covid-19 cases and consequent lockdown. Another important factor would be the geopolitical situation with a new US president set to take charge, they added.

Dalal Street wrapped up 2020 on a bullish note, with the Sensex gaining 15.7 per cent during the year marked with panic selling as well as record-breaking peaks. "Markets have been continuously making newer highs led by strong liquidity flow, supportive global cues, positive news on progress of Covid vaccines and US stimulus announcement.

However, we feel some consolidation at the start cannot be ruled out, citing stretched valuations across the board. "Nonetheless, we would see a decent performance in the markets, given overwhelming liquidity support from central banks, which is expected to continue in 2021 as well. On the domestic front, we believe improving India's fiscal position and NPA situation would boost sentiments. Besides, the Union Budget and earnings are crucial events for investors...," said Ajit Mishra, VP Research, Religare Broking.

Considering the present scenario, Sensex and Nifty have the potential to test 48,000-plus and 14,500-plus zones this year, he added. Mishra added that markets are trading at expensive valuations after the phenomenal recovery in the last nine months, so there could be profit-taking ahead followed by consolidation initially and earnings recovery would decide the future course of equities. Vinod Nair, Head of Research at Geojit Financial Services said, "Despite the havoc created by the Covid-19 pandemic, the economy is expected to recover in 2021 giving boost to the equity markets in addition to upgrades in corporate earnings."

"We expect Sensex to touch 51,500 level, while Nifty is expected to cross 15,100 mark due to enough liquidity and better than expected recovery in businesses," said Vinit Bolinjkar, Head of Research, Ventura Securities. According to analysts, the prospect of vaccines, additional stimulus package by developed countries and gradual recovery in the global economy will drive the domestic market.

"CY21 will be marked with hopes of early rollout of Covid-19 vaccine, normalisation of activities and unperturbed growth recovery. We expect CY21/FY22 to be a better year with likely strong recovery in both the economy and earnings," said Jaideep Hansraj, MD & CEO, Kotak Securities.

Sumedha Shankar