Asset

Best Asset Class of 2021: Asset Class Review: Risk Assets Continue to Dominate, Energy, Real Estate Assets Breaking the Rut

NEW DELHI: after a year of disappointment, energy meters have taken off against a backdrop of growing demand and supply compression. Cryptocurrency, on the other hand, continued to perform well for another year.

In the base metals pack, most meters gave solid returns increasing up to 45%. Among agricultural products, cotton has been a big winner due to the increased international demand for this crop. Ingot counters ended with cuts.

Stocks continued their momentum from last year, although banking sector underperformance and some late sales dampened some of those gains. Mutual fund returns were also strong.

Bitcoin: continues its course
Bitcoin was the asset to hold in 2020 as the cryptocurrency jumped nearly 300% during the year. The rally also extended into 2021, more than doubling to an all-time high of $ 68,790 on November 10. However, profit recognition since then has reduced the gains. He’s corrected over 33 percent of his peak. Market analysts say the numero uno digital token is for consolidation and corrections after a long rally.

Jay Hao, CEO of OKEx.com, said year-end volatility in Bitcoin is expected as we are seeing a lot of institutional and retail sales in the crypto market globally. Other market experts argue that the lack of clarity on fundamentals and use cases, along with the widespread buzz about regulations and legitimacy, hurt feelings.

Precious metals: dull
After rising 30% in 2020, the gold flakes were unable to last into 2021. This was largely due to a strong US dollar, which historically has an inverse relationship to bullion, and the the appeal of safe havens as the outlook for the global economy improved. . However, the inflationary phase did not turn out to be “transitory”, as hoped by central banks around the world. Silver was also hit during the year amid heightened volatility in industrial metals.

Analysts are moderately positive on both precious metals counters for 2022 and a few analysts say those may still offer double-digit returns.

“After the modest losses of 2021, gold faces an equally difficult year in 2022 as the Fed and other central banks accelerate the process of monetary tightening to control the rise in prices. However, at the same time, increasing inflationary pressure and signs of volatility in the stock markets may increase the attractiveness of gold, ”said Ravindra V Rao, vice president of commodities research at Kotak Securities.

Base metals: demand continues
Demand for metallic raw materials continued to hold up for most of the year, pushing prices higher. Prices cooled in the last months of the year. Despite this, they gave investors enough reason to rejoice.

With a recovery in demand, copper jumped 25%, nickel 28%, zinc 32% and aluminum 42%. Lead ignored its underperformance last year, increasing only 20%.

ETMarkets.com

“Rising commodity prices, following supply concerns and a stronger dollar index, have caused inflation to rise. From agro to metals to raw materials, everything has increased in 2021. The supply constraints of these raw materials have been caused by the Covid restriction that most countries have imposed, and no one is calling it for now, how and when these restrictions will be lifted, ”said Gaurang Somaiya, Forex and Bullion Analyst, Motilal Oswal.

Currency: the rupee depreciates
The rupee in 2021 has consolidated in a wide range of 72.50 and 75 against the US dollar. But just before the end of the year, it broke the barrier and hit a high of 76.50 to the dollar. The intervention of the Reserve Bank of India (RBI) is suspected of having controlled volatility and led to the stabilization of the currency.

“The recent movement of the dollar suggests that the range has moved higher and more lows could be bought, and all of the factors mentioned above will be important in determining the trend of the rupee. that the USDINR pair is trading with a positive bias and with a range of 73.50 and 77.50, ”Somaiya said.

Energy: Quick rebound
After a forgettable 2020 for the most traded and perhaps the most important energy commodity, crude oil produced exceptional returns in 2021. Brent crude oil prices jumped 62%, while natural gas surged by 71%.

Prices soared as demand increased in economies that reopened during the year. A drop in production in OPEC + countries and a tightening of supply also contributed to raising prices.

“The current situation with oil futures is such that funds may be about to start buying again. Everything will depend on Omicron and any blockages. The risk of further infections is high and therefore the trend remains down for WTI prices to reach levels of $ 66-67 in the coming weeks, ”said Navneet Damani, vice president of the commodity and currency research, Motilal Oswal.

Real estate: a year in review
Demand for residential properties surged during the year, ending a multi-year lull as low interest on home loans increased demand. Investors in these properties have also generated decent returns. The year 2021 saw a recovery from the pandemic turmoil, a remarkable improvement in sales volume and a stable to marginal increase in price dynamics. This was also reflected in the shares of real estate companies. The Nifty Realty emerged as the second best sector of the year.

Rajani Sinha, Chief Economist and Country Director of Knight Frank India, says residential real estate investors have achieved a rental yield of around 2% p.a. and 0-5% capital appreciation in the top 8 cities.

Demand for warehouses also remained high and office space also saw demand decline as the pandemic ebbed. “In the case of commercial office space, investing in high-quality assets would have generated a rental yield of 7-8% per year. In terms of capital value, investors would have seen a decline in the first part of the year during the second wave of Covid and stability later, as demand for office space improved over the last. quarter of the year, ”Sinha said.

Equity: Massive crash then record race
For equities, the exceptional returns continued for another year, although delayed earnings recognition due to the third wave of the virus and rising inflation resulted in lower earnings. Nonetheless, 2021 has been very rewarding for equity investors. The Sensex 30-stock benchmark has broken record highs of 50,000 and 60,000 this year, following the pandemic-triggered crash in March 2020.

While worries about rich valuations ease a bit, the street is pretty positive on 2022 returns. Some brokerages are predicting a Sensex target of 72,000 and a corresponding Nifty target of 21,000. Bullish targets suggest a rise 23-26% potential for market indices in calendar year 2022.

In a survey by ETMarkets, the most optimistic analyst was Amar Ambani, senior chairman and head of institutional equities at YES Securities. He forecast Sensex at 72,000 and Nifty at 21,000. The lower targets were set by Vinod Nair, head of research at Geojit Financial Services. He saw Sensex at 58,800 and Nifty at 17,500, respectively.

UCITS: the thematic schemes in mind
While stocks were booming, most mutual funds have performed well in 2021, with some reaching 90% year-to-date. The top five funds of the year were Quant Small Cap Fund, Quant Infrastructure Fund, L&T Emerging Businesses Fund, Principal Small Cap Fund and ICICI Prudential Technology – a mix of small cap and sector funds – offering returns of 76-90% .

Within the debt fund category, both credit risk and high risk funds performed well in a low interest rate environment. UTI Credit Risk Fund, Baroda Credit Risk Fund Plan B, Nippon India Strategic Debt Fund, IDBI Credit Risk Fund and Franklin India Low Duration were the top five performing debt funds, yielding 17-23%.


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