Two factors, easy money policy and strong inflows from both FIIs & retail investor helped for a strong equity performance in 2020 and 2021.
Rise in retail investors, was a global phenomenon, led by fiscal household policy, rise in low-cost and research supported platforms, bounce in secondary and primary market.
MSCI-India index is trading at 1year forward P/E of 22x, about ~20% higher than 5 year average of 18.5x.
Political scenario is stable, however crucial state elections scheduled in March and May are important points to ponder on, especially for FIIs, which will bring volatility in the short-term.
India’s quality of work in segment like Information Technology with rising global demand of digitation, demand for Chemicals by global outsourcing and Healthcare by quality and capacity of pharma and API is very well known.
Near-term volatility is anticipated since the broad market is still trading at elevated valuations and areas which have done well in 2021 may not retain that tag in 2022.