2020, the year of 2 extremes for markets
Dalal Street pendulum swings from historic low to record high
image for illustrative purpose
The year 2020 has been a period of two extremes for markets. During past 12months, the equity markets have kept swinging between extreme fear and greed. The year began on a buoyant note. The benchmark indices scaled their all-time high on 24 January, after the rally for four months. In the following two months, the indices corrected ~40% from their January highs, refreshing the fading memories of 2008 crash.
A sustained rally after that took indices to new highs in the next nine months. This rally was remarkably different from September 2019-January 2020 rally in terms of volumes, market breadth, and participation. Foreign investors and domestic household investor have been notable buyers in 2020 rally, while the domestic institutions have been net sellers.
Though benchmark indices indicate that mid and small-cap indices have done materially better than the benchmark Nifty; the market breadth has not been encouraging. Relatively less represented sectors IT and pharma outperformed strongly, while the most represented financials and energy were massive underperformers.
Market breadth was positive only for five months, while in seven months market breadth was negative. March 2020 was the worst month, and August 2020 was the best month in terms of market breadth.
