Equity beats other asset classes as markets scale new highs | Ahmedabad News – Times of India


Economic growth picked up pace in 2021, despite a sinister second wave of Covid-19, which temporarily slowed the pace of commercial activity and industrial output. Notwithstanding the challenges, Indian equity markets scaled record high levels through the year assuring handsome returns to investors in equities and equity-based mutual funds. Unlike gold, which was the apple of the investors’ eye last year, stocks have emerged as the best asset class this year. TOI maps the performance of various asset classes from January to August this year, and how it fared for investors.
Shares are star performers
With the benchmark equity indices Sensex and Nifty scaling new peaks, equity has beaten other asset classes such as gold, real estate and bank deposits to deliver the best returns to investors in 2021. Sensex has yielded 20% return as the index rose from 47,868.9 points on January 1 to 57,552.3 points on August 31. The return works out to be a handsome 50% in one year till August-end. “There are not many opportunities for returns in other asset classes. As against this, equity index Nifty has offered 9% return in the past one month alone and 49% over the past twelve months. Only stock market is currently offering returns higher than inflation level,” said Nilesh Kotak, an Ahmedabad-based stock analyst. “Immense inflow of liquidity, new investors, and investor euphoria contributed to the strong rally in the equity market,” added Kotak.
Market rally drives up NAV of equity-linked MFs
Investors made good money from mutual fund (MF) investments as well throughout 2021. Overall performance of equity-linked MFs was good with small cap mutual funds delivering up to 46.5% and midcap MFs providing 35% returns between January and August. “Three factors which assisted equities to deliver better returns include a robust vaccination drive coupled with receding cases of Covid-19 after the second wave; no increase in the US Fed rate this year, and the resilience showed by the economy. Market sentiment stayed up, especially in face of the second wave and after it, causing indices to touch new highs,” said Mumukshu Desai, director of a city-based financial advisory firm. “Retail as well as High Networth Individuals (HNIs) have invested in MFs. Moreover, institutional investors too have also parked surplus money in debt funds as capital expenditures were halted since the pandemic,” Desai added. Buoyed by promising returns, retail investors turned to equity markets, pushing up overall AUM. “Increasing awareness among investors was clear, causing them to choose MFs,” said Jayesh Vithalani, a city-based financial advisor.
IPOs give handsome rewards
It is not just the secondary market, but investors have also made good money from the primary market with most initial public offers (IPOs) getting listed at premium.Sample this: Out of seven IPOs launched by Gujarat-based companies, six have yielded positive returns over their issue price. Only Nuvoco Vistas Corporation has offered a negative return of 2% as of August 31. Companies such as GR Infraprojects Ltd and Tatva Chintan Pharma Chem Ltd have each delivered a 90% return over their issue-price by the end of August. Other Gujarati firms like Anupam Rasayan Ltd and Heranba Industries Ltd have yielded 37% and 29% returns, respectively.
Fixed deposit returns continue to remain low
Fixed deposit rates have continued to remain low with banks having higher liquidity due to the rise in cash deposits. Investors have received returns of 4.9% on bank fixed deposits during Jan-Aug this year. “With interest rates plunging as low as 4.9%, people have slowly begun pulling money out of fixed deposits as they mature and investing them in other asset classes,” added Vithalani.
Property price hike results in 15% gains
With real estate developers raising property prices to pass on the increase in construction cost, consumers who bought residential properties in earlier schemes have received returns in the range of 10-15%.
“The prices of units in new residential schemes have gone up following a surge in steel, cement, sanitary ware items prices, as well as the increase in transportation costs,” said Ashish Patel, president, CREDAI-Gujarat. “As a result, the valuation of properties purchased in schemes launched before the price hike has also gone up by 15% in Ahmedabad, offering the same percentage of returns to those home buyers,” Patel added. However, the commercial segment, according to real estate developers, continued to remain muted in terms of returns. “Investors dealing in land have received returns of about 30% this year,” added Patel.



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