Markets: Stocks have a stellar run in FY21

By Urvashi Valecha
Markets in the outgoing fiscal year (FY21) have seen few losers as stocks rallied sharply from the lows of March 2020. The rally was propelled by several stocks that rose between 179.99% and 691.09%. Only two stocks from Nifty100 declined during the period.

Many stocks that emerged as winners belonged to the automobile and metal sectors. Experts, however, believe that further upside to these stocks is limited.

The top gainer in the Nifty100 for FY21 was Adani Green Energy, which has rallied by 691.09%, followed by Adani Transmission, Tata Motors, Hindalco Industries and Motherson Sumi Systems that rose by 360.51%, 317.7%, 241.85%, and 225.96%, respectively.

There were only two stocks in the 100 company index that declined for FY21. Coal India and Abbott India declined by 7.46% and 2.73%, respectively.

According to Sanjeev Hota, head of research, Sharekhan by BNP Paribas, metal stocks have reacted to the liquidity factor that has surged globally, and have been led by increasing demand from China and the world. “Metal stocks were beaten down significantly from their earlier highs and have now risen mainly because of the liquidity factor, rise in metal prices on improving demand and the global rally. Similarly, auto sector stocks rising is a play on recovery, the valuations have become reasonable and with demand for personal mobility rising the auto stocks have gained.”

Going forward, however, experts think the upside to these stocks is limited. Rusmik Oza, head of fundamental research, Kotak Securities, said, “In the case of automobile stocks, there should be a pause in the rally as the demand for automobile peaks out amid the Covid-19 second wave peak. Even metal stocks would cool down, as the prices stabilise on improving supply and the raw material prices would come down.”

According to Oza, the sectors next year that are likely to do well are banks, capital goods, engineering and construction.