Indian Market Trends 2022: High-Value Investors Expected to Rise

The old year is over, and as we head into the new one, it is time to review the financial trends of last year and prepare for 2022. India’s equity markets reached new milestones, drawing many first-time investors.

2021 also saw an increasing number of unicorns, a rise in the organized sector, and new financial platforms. A growing number of HNI’s (high net worth individuals) and UHNIs (ultra-high net worth individuals) entered the market due to these factors.

Now let us take a look at the financial trends of last year in more detail.

RBI Keeps Repo Rates Low

A second wave of the COVID-19 pandemic made the beginning of 2021 challenging for everyone. As the economy was affected, RBI (Reserve Bank of India) decided to keep the repo rates low throughout 2021. Interest rates remained at historic lows, coming down to 6.4% p.a at the year’s end.

This measure helped the economy as new customers flocked in to benefit from low interest rates. However, RBI may introduce hikes in key policy rates. Borrowers with floating-rate loans may have to pay higher EMIs if this happens.

Stock Markets Reach New Highs

Ultra-loose monetary policies of global central banks and high liquidity led to the equity market’s strong performance throughout 2021. Nifty 50 rose to 24% this year, and its rally was broad-based.

In a bullish stock market, those who maintained their investment were rewarded with excellent returns. A record number of people opened Demat accounts, indicating increased participation in direct stocks. Many new-age companies benefited from a strong show in stock markets, drawing record subscriptions.

Increased in Usage of Digital Platforms

Increased penetration of internet usage and smartphones among the Indian population saw a rapid increase in the usage of digital financial services. More investors moved to easy-to-use platforms where they could easily make investments at the click of a button.

Through digital wealth management, investors can get professional advice, use different digital channels for transactions and get improved investment experience. More and more platforms now use algorithm-based Robo-advisors making the investment process accessible to many people.

More Investments from HNIs and UHNIs

The last few years have seen a considerable rise in the number of HNIs and UHNIs in India. In 2021, their participation in equity increased as a result of low-interest rates and prevailing yields. Moreover, factors like the need to replace reduced income, extra time at hand and work from home accelerated their equity trading activity.

New-age brokerage apps like Zerodha, Smallcase and Groww made it easy for these investors to participate in the equity market. A few even offer premium services like PMS and AIF from reputed fund managers. Many of these high-net-worth investors also participated in IPOs (Initial Public Offerings) of many companies.

Low FD Rates Drives Investors to New Investments

Interest rates on FDs remained subdued throughout 2021. Meanwhile, inflation continued to rise, leading to a negative real rate of returns. As a result, many risk-averse investors moved away from traditional asset classes like fixed deposits and bonds.

Regardless of their wealth, most investors today want to invest in alternative assets such as private equities, cryptocurrencies, structured debt, commodities and hedge funds. More investors are looking for customised advisory based on risk appetite and investment horizon. Therefore, it is likely that new wealth management solutions will come up to supply this need.

Gold Price Remains Subdued

Unlike in 2020, gold prices remained subdued throughout the year. Its price in the past 12 to 18 months has not changed much, remaining in the range of Rs. 4500 to Rs. 5400 per gram during the year.

Gold is one of the best methods of hedging against inflation, but its price softened over 2021. This could be caused by the strengthening of the US Dollar, which in turn made it more costly in other currencies, decreasing its demand. Some experts are of the opinion that its price could be consolidating in the near future.

A Record Number of IPOs

The primary markets were also super active, with a large number of companies raising funds via IPOs. Fundraising via IPOs hit a new record high of Rs. 1 lakh crores, with over 63 companies participating in it. Many of these public offerings also saw record oversubscriptions and massive growth in the lending books of associated merchant banks.

The year saw strong retail participation in these IPOs, leading to huge listing gains. The total funds mobilised was at Rs. 1,19,431 crores, almost double the previous best in 2017. Promoters and existing investors of new-age companies have benefited the most from this, selling off their stakes at high valuation via OFS (offer for sale).

Parting Thoughts

The performance of equity markets in 2021 suggests a positive outlook for this year. Strong liquidity, supportive monetary policy and vigorous vaccination efforts have led to a faster-than-expected economic recovery.

Besides these positives that could lead to economic expansion, 2022 can have its fair share of volatility. Investors, as always, should exercise due caution to avoid high investment risks.

Source: Moneycontrol

Frequently Asked Questions.

1. How have cryptocurrencies performed in India in 2021?

In India, there was a huge spike in total investment in cryptocurrency. The crypto market remained largely volatile throughout the year.

2. What is RBI’s new auto-debit rule?

RBI introduced a new auto-debit rule in October 2021, banning automatic recurring payments without additional security measures. Financial institutions are required to carry out AFA (additional factor of authentication) for auto-debit over Rs. 5,000.

3. What are some relatively new investment products to look out for in 2022?

REIT (Real Estate Investment Trust) and InvIT (Infrastructure Investment Trust) are some relatively new financial products that have the potential to attract higher investor interest this year.

Disclaimer: This blog is exclusively for educational purposes and does not provide any advice/tips on investment or recommend buying and selling any stock.