NEW DELHI: Calendar year 2021 ends with double-digit returns for the market, the third year in a row and the best since 2017. Global supply chain normalization, inflation slowing, no waves of Covid harsh, likely positive results for the outgoing BJP governments in state elections, growth-oriented policies, a smooth withdrawal of liquidity and, most importantly, no disappointing earnings would be key to continuing the trend, said analysts in an ETMarkets.com poll.

A pro-growth budget and an accelerated pace of divestments in PSUs can act as a catalyst for markets, said Yesha Shah, head of equity research at Samco Securities.

Shah said that a rapid slowdown in inflation and commodity prices can provide much needed relief for India Inc and may increase profits in the short term. Containing the spread of Omicron, rapid vaccination and increasing resistance to Covid variants can bring back recovery faster, he said.

The BSE Sensex ends the year with a gain of 20%, against 15.75% in 2020 and 14.37% in 2019. This gain would be the highest since the index return of 27.91% in 2017 .

Mohit Nigam, PMS manager at Hem Securities, said the 2022 budget would be the biggest trigger for the market. He noted that the government had announced a record sum for capital spending and that also this year investors were hoping for the same with the government’s dream project – PM Gati Shakti (National Master Plan for Multimodal Connectivity) .

An increase in corporate profits was expected in the second half of the fiscal year, as companies already absorbed higher input costs in the first half of the year, Nigam noted, adding that the increase in investment in the form of investment programs. The production-related incentive (PLI) and investment in the energy sector, in addition to an increase in exports, would play a key role in the dynamism of the market.

For Neeraj Chadawar, head of quantitative equity research at Axis Securities, vaccination is the main driver. He said the 2022 budget, which is likely to be growth-oriented, could help the economy gain momentum. “We believe that political reforms like Atmanirbhar Bharat and PLI programs should continue in 2022 and be even deeper. Infrastructure spending is expected to be a key program in the budget, with an additional push expected on affordable housing, ”he said, adding that he expected over 20% growth in income from. Nifty over the next two years.

“In addition, the return on equity (ROE) for the entire market is improving after a mixed performance for several years. The cumulative and rolling net profit of the NSE 500 universe over the last four quarters has reached an all-time high, with loss-making sectors turning positive and contributing significantly to net profitability. With a faster economic recovery on the horizon, more cyclical sectors are likely to join the rally pending increased government spending, ”said head of quantitative equity research at Axis Securities.

Mitul Shah, head of research at Reliance Securities, said all hopes are in the investment cycle, policies such as the China + 1 strategy and a reasonable reversal of the interest rate cycle.

He said the strong recovery in capital spending is likely to continue and will be the biggest hope for manufacturing industries. The recent PLI program has encouraged industries to expand their base with the adoption of new technologies, he said, adding that global companies are considering diversifying from their dependence on China to others. developing Asian countries, like India.

“It creates a new landscape for manufacturing opportunities. An ideal strategy would be to have effective supply chain management. We believe India is better placed to take advantage of this opportunity, as well as government support through various programs such as Make in India, PLI, etc. This is expected to dramatically increase the manufacturing base and make India a global manufacturing hub in the coming years, ”he said, while suggesting that the pace of interest rate hikes could be. much slower.

A lower interest rate cycle always supports companies in terms of the cost of capital, which in turn helps the stock markets, he added.