Covid-19, US polls, Atmanirbhar Bharat: Events that moved markets in 2020

It has mostly been a one-way street for the markets since hitting their low in March 2020 on Covid-19 induced lockdown with the S&P BSE Sensex and Nifty indices hitting all-time high levels and breezing past 47,000 and 13,700, respectively. Since their low in March 2020 the indices have surged over 85 per cent on the back of strong flows from overseas investors. On a year-to-date basis, the gain has been around 15 per cent.

As we stand ready to draw curtains on 2020 and welcome 2021, here are some events that shaped markets this year.

Economic slowdown and rising markets: The benchmark S&P BSE Sensex, which crossed the 42,000-mark for the first time on January 16, 2020, scaled new record high of 42,274 levels on January 20, 2020 while NSE’s Nifty50 hit a lifetime high of 12,430.5. The feat came after the US and China inked Phase 1 of their trade deal paving way to roll back some tariffs and pushing China to boost purchases of US goods and services by $200 billion over two years. Besides, investors also pumped in funds ahead of the announcement of the Union Budget for FY21 in anticipation of stimulus measures that the government could announce to drive the economy out of the slowdown.

 

Budget 2020: The budget nudged investors to book profit as status quo on long-term capital gain (LTCG) tax, confusion about the impact of Dividend Distribution Tax (DDT) removal and taxing dividends in the hands of recipients, and more complex personal income tax regime dented sentiment.

On February 1, the benchmark equity indices fell the most in a day (till then) since November 2016 on a closing basis. During the intraday trade, the 30-share BSE benchmark plunged 1,092 points, while the Nifty skid 330 points.

Markets hit lower circuit: The onslaught of the pandemic and the consequent fear of unparalleled economic disruptions halted the bull-run at the bourses. Since the first confirmed and reported case of coronavirus, the Sensex index fell by more than 1,000 points in five separate trading sessions. On March 13, a 45-minute trading halt was triggered after domestic equity indices hit 10 per cent lower circuit as new travel restrictions to curb the coronavirus outbreak rattled world markets. As the bear grip tightened, the S&P BSE Sensex and the Nifty50 indices tumbled nearly 40 per cent from their January 20 peaks to hit a low of 25,639 and 7,511, respectively on March 24.

Oil turns negative: Not just equities, commodities markets too bore the brunt of nation-wide lockdowns across the globe. As oil demand dried, oil firms resorted to renting tankers to store the surplus supply which forced the price of US oil into negative territory. In April, the price of a barrel of West Texas Intermediate (WTI), the benchmark for US oil, fell to historic low of -$37.63 a barrel.

Gold – The safe-haven bet: Gold prices moved higher from a level of Rs 39,113 per 10 grams seen at the beginning of the year to record-high levels of Rs 57,100 per 10 gm on August 7, 2020 as investors rushed to buy the yellow metal as a safe-haven investment in the backdrop of Covid-19 pandemic. However, progress in development of Covid-19 vaccine has seen prices drop to around Rs 49,200/10 gm in the futures market, but still up around 23 per cent YTD.

Accommodative policies of global central banks: Global central banks were proactive in announcing liquidity measures to support economic growth in the wake of the pandemic. The US Federal Reserve (US Fed) promised to keep funneling cash into financial markets further into the future to fight the recession, even as policymakers' outlook for next year improved following initial rollout of a coronavirus vaccine. On its part, the Reserve Bank of India (RBI) also announced a cut in rates and liquidity measures to support the economy and markets.

Atmanirbhar Bharat Abhiyan: After nearly two months into the nation-wide lockdown, the Narendra Modi government announced Rs 20-trillion stimulus package, touted as one of the largest in the world, to weather the fallout of the Covid-19 pandemic. Spread over three tranches, the measures aimed at providing relief to Central government employees, a host of sectors that included real estate, rural employment, Covid-19 vaccine research, MSMEs, farmers and gave ammunition to the Reserve Bank of India (RBI) to help reviving economic growth. READ ALL ABOUT THE PROGRAMS HERE 

India-China border issue: Investors got embroiled in market rout in August when the Indian army alleged that the Chinese army carried out ‘provocative military movements’ to ‘unilaterally’ change the status quo on the southern bank of Pangong Tso Lake.

Record fund raise by Reliance Industries: The pandemic failed to stop Mukesh Ambani-controlled Reliance Industries (RIL), which raised a record Rs 1.52 trillion crore by selling stake in Jio Platforms to marquee global investors. The company also raised money for its retail venture – Reliance Retail during the year. The move saw the stock rise 151 per cent from its March 2020 low of around Rs 875 to hit a high of over Rs 2,200 during the year. The surge in RIL stock during this period was, to a large extent, driver of the frontline indices during the pandemic impacted year.

 

US elections and FII flows: Indian equities have been on a record breaking spree, especially after Democratic candidate Joe Biden was announced as the US President-elect. Expectations that his policies may hit the US corporate, foreign investors have turned to emerging markets, including India. In November, FIIs pumped in record Rs 62,782 crore in the Indian equities – highest monthly inflow in nearly two decades. The infusion has continued in December with an investment of Rs 36,096 crore till December 13.

Covid-19 vaccine: Risk aversion among investors took a backseat after four vaccine candidates – Pfizer and BioNTech, AstraZeneca and Oxford, Sputnik V, and Moderna – claimed over 90 per cent efficacy in preventing Covid-19 infection. A new strain of virus, however, created a flutter globally as key trading hubs in Europe announced re-lockdown as a precautionary measure in late December.

Burger King, Mrs Bector's IPOs sizzle: The pandemic failed to dampen the primary and secondary capital market issuances with the year closing with the highest ever fund raising from the equity markets, that grew at 116 per cent to Rs 1.78 trillion in IPOs, offer for sales (OFS) and other market issuances, according to a report. READ MORE HERE

Brexit deal: Britain clinched a Brexit trade deal with the European Union (EU) last week, just a week before it exits one of the world’s biggest trading blocs. The deal was agreed after nearly four years when Britain first decided to leave the bloc. Britain’s parliament will vote to approve the deal with the EU on December 30.