 "In pics: 2021 belonged to investors, no matter where they placed a bet")
The Indian benchmark indices often hit record highs this year, with the Sensex for the first time racing past the 50,000 and 60,000 milestones and the Nifty50 soaring past 18,000. The Sensex and the Nifty50 peaked at 62,245.43 and 18,604.45, respectively, and have since slipped to 57,000 and 17,000 levels as foreign investors pulled out in droves with global central banks turning hawkish and the fast-spreading Omicron variant of coronavirus triggering a fresh round of uncertainty.
Still, the Nifty is up over 21 per cent and the Sensex has risen more than 19 per cent in the year. The rally has also been broad-based: While the BSE MidCap is up over 37 per cent this year, the BSE SmallCap has jumped more than 60 per cent. Globally, too, the equity markets performed well and Wall Street recorded new highs on a number of occasions this year. Continuing the previous year’s trend, retail investors entered the markets in large numbers and fuelled the bull run. As of November 30, the number of demat accounts stood at 77.2 million, against 55.1 million at the end of FY21.
It was a busy calendar year for the primary market in India. Led by new-age technology companies, such as Nykaa and Zomato, as many as 63 firms collectively raised Rs 1.18 trillion via initial public offerings (IPOs) during 2021 — the most in any calendar year and significantly better than the previous record of Rs 68,827 crore in 2017. Start-ups like Zomato, FSN E-Commerce Ventures that operates online beauty e-commerce platform Nykaa, and PB Fintech, the parent firm of Policybazaar and Paisabazaar, were the scene-stealers. It all started when in July, Deepinder Goyal-run Zomato became India’s first unicorn to list on bourses at a 53 per cent premium to its issue price, following a Rs 9,375-crore offering.
Falguni Nayar-led Nykaa’s stellar primary market showing and secondary market debut not only turned her into a billionaire overnight but also an icon of women entrepreneurs. The Rs 5,352-crore IPO was subscribed 81.78 times and listed at a 79 per cent premium.
Vijay Shekhar Sharma-led One97 Communications, the parent of digital payments platform Paytm, raised Rs 18,300 crore through India’s biggest-ever initial offering, surpassing Coal India’s 2010 record of Rs 15,200 crore. However, it made a disastrous debut on the stock market, crashing 27 per cent amid concerns about its lofty valuation and business model. Rakesh Jhunjhunwala-backed Star Health and Allied Insurance Company — India’s largest health insurance firm — also disappointed upon listing.
In her Budget speech, Finance Minister Nirmala Sitharaman announced that Life Insurance Corporation of India (LIC), a fully-owned government undertaking, will be listed. Amid opposition from unions, the government is planning to dilute 10 per cent of its stake in the country’s largest life insurer, the valuation of which is expected to exceed Rs 10 trillion. The Union government has made amendments to the LIC Act to facilitate a higher share of profits to shareholders in line with the practice followed by other insurance firms, and also allow it to shrink its stake in the life insurer to 51 per cent but this is only an enabling provision, for now. It has selected 10 leading global and Indian banks to manage the mega IPO. The management of LIC, in its recent meeting with potential global investors, boasted its nearly Rs 37 trillion assets under management (AUM) — almost equal to the net assets of India’s entire mutual fund industry.
The Securities and Exchange Board of India (Sebi) took several important decisions. Amid concerns being raised by the MF industry, the regulator had to tweak the circular that mandated paying a fifth of compensation to key employees of asset management companies in the form of mutual fund (MF) units. The regulator later said “junior employees”— those below 35 years — would have to invest only 10 per cent of their compensation in MF units of the fund house in the first year, and 15 per cent in the second year (from October 1, 2022), as against 20 per cent for the other employees. The regulator also decided to implement the T+1 settlement cycle, instead of the T+2 cycle, in an optional and phased manner, following representations from foreign investors. In a significant move, it reduced the minimum lock-in period for promoters’ investment after an IPO to 18 months from three years, under certain conditions. The move was to help many new-age tech start-ups to list on the stock exchanges. This, even as Ajay Tyagi-led Sebi board tightened IPO disclosure norms, besides mandating a minimum 5 per cent gap in IPO price bands, and setting a 90-day lock-in period for 50 per cent of anchor investors’ portion following the IPO.
The universe of cryptocurrencies, according to estimates, saw investments worth $30 billion and their market capitalisation hit $3 trillion during the year. Even as the central government pondered how to regulate this new asset class and pushed back the tabling of the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, Indians’ investment in these digital tokens surged to over $10 billion (as of November), from $923 million in April last year, according to crypto research and intelligence business CREBACO. China’s blanket ban on cryptocurrencies dented global sentiment a bit but failed to cool it down. Bitcoin, which started 2021 around $30,000, is currently trading at over $50,000 — after nearly touching the $70,000-mark earlier this year. El Salvador became the first country to use bitcoin as legal tender, and also planned to build Bitcoin City at the base of a volcano, with the cryptocurrency funding the project. And, Tesla CEO and billionaire Elon Musk’s repeated tweets endorsing relatively unknown dogecoin took it to record highs.
On February 24, the National Stock Exchange (NSE) suffered a technical outage that wiped out almost the entire trading session, barring the first 50 minutes or so. Everything that could have gone wrong, went wrong: The disaster recovery site did not work and there was no communication from the NSE for the most part of the day. The NSE blamed a dug-up road for the outage, even as stockbrokers dashed off a letter to the Securities and Exchange Board of India alleging huge monetary losses to investors. Following the incident, both NSE and BSE came out with comprehensive guidelines later this year to prevent such disruptions. Under the new framework, members will have to pay Rs 20,000 per day in case of failure to report the incident to the exchanges within the required timeline, the BSE and the NSE said in separate circulars. These guidelines included standard operating procedures for reporting glitches by members and a quick switch to the disaster recovery site.
The crackdown on China’s tech sector continued for a second year, with ride-hailing giant Didi being forced to delist from the NYSE within six months of its IPO. Tencent, already under pressure, faced a major setback when a new rule stated that children could only play online games for one hour a night on Fridays, Saturdays, Sundays, or holidays. The $100-billion private education sector of China suffered a body blow when its government mandated online tutoring companies to go non-profit. The country has tightened regulation on its domestic tech sector in many areas, from data protection to antitrust, over the past year.
Payments via the Unified Payments Interface (UPI) surged 86 per cent to Rs 63.32 trillion as of November-end, against Rs 33.88 trillion in CY20. This method clocked 7,090 times growth from Rs 893 crore in 2016, the year of its launch. Earlier used for small-ticket payments, it is now gaining traction among investors, too. According to the data released by the National Payments Corporation of India (NPCI), when it came to IPO mandate execution — transactions where an investor is allotted shares — record 1.24 million or 16.3 per cent of all the mandates created in November through UPI got executed.
Global energy crisis, especially in China, pushed coal prices up near record highs in international markets, even as world leaders talked about clean power generation. Though prices of this fossil fuel have cooled, of late, the entire episode only reaffirmed global dependence on thermal power for energy needs. Prices of metals, such as iron (steel), aluminium, copper, and zinc, traded at or near record highs for several months, as the global economy first sputtered and then picked up. This helped Indian metal stocks to witness huge gains; the BSE Metal index is up nearly 65 per cent in CY21, despite late softness.
An army of Reddit traders — who teamed up on subreddit r/wallstreetbets in the early days of 2021 and were led by one Keith Gill — bid up relatively obscure GameStop’s shares, which were heavily shorted by hedge funds, in an effort to defeat Wall Street at its own game. This retail buying triggered massive short-covering among hedge funds, fuelling the rally even further. They doubled and trebled their positions by the day amid rally cries of “diamond hands” and “to the moon”. These amateur traders jokingly referred to themselves as “Apes”. The GameStop rally sent the stock up as high as 1,600 per cent, before the thud. Citron Research had to discontinue its short-selling research in the aftermath of the first major meme stock episode. Melvin Capital, a major hedge fund, had to be bailed out by two other firms. The Apes rejoiced: David took down Goliath. But the Wall Street giants recovered. Now, trading volumes for GameStop and another meme stock favourite, AMC Entertainment, have faded. The GameStop euphoria, brief though, marked a turning point for Wall Street — it could no longer dismiss social media or investors who congregate on it.