March 2021 marked the first anniversary great fall inequities.
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march 2021 monthly wrapup

March 2021 marked the first anniversary great fall inequities.

March 2021 marked the first anniversary of the great global fall inequities. The fear was so high in March 2020 that even the most daring devilish investors wanted to stay away from markets.

Exactly one year later, the situation appears to be on the opposite end of the spectrum. The enthusiasm and greed today appear high enough for even most conservative investors to enter equity markets.

Let us see how different sector indices have performed in the last year since March 2020. We simply took the closing price of different sectoral indices as of March 2020.


Here are the results:

monthly warpup market talk

Nifty Metal index tops the list followed by Nifty Auto. If we make some preliminary observations from the above list, we can say that sectors with the highest fear or uncertainty seemed to have done the best.

Let’s talk about the Nifty Metal index as a case in point.

The business scenario in March 2020 was perhaps the worst ever the world witnessed. Businesses were shut and there was no question of non-essential manufacturing picking up.

Metal consumption is directly correlated with economic activity in the global economy. The marred sentiment created extreme pessimism in the share prices of metal companies.

Are you an investor who takes pride in investing in metals back then?

Well, if you really invested in metals in 2020, do pat yourself on the back. You did exceedingly well in going contrary to the market sentiment. You took a risk and got handsomely compensated for what you did.

I am forced here to cite a cliche ‘No risk, no reward’

Let’s come to the auto sector. Much before the pandemic began, India’s auto sector was going through prolonged pain. The reasons attributed to this lull were many, however, the root cause of the lull was the inherent cyclicality of the auto industry.

It would be unfair to expect the demand for vehicles to rise in a linear fashion. There are years when the transport operators do not add capacity owing to multiple demand-based statistics.

And then there are years when the industry adds on capacity owing to the optimistic demand expectations. On the arrival of COVID, the fear in the sector reached its peak.

As it usually happens in stock markets, fears ‘peaks’ and prices reach the ‘trough’.

There is smartness in acknowledging that sinusoidal waves are for real. Don’t you wish your school also taught you about these real sinusoidal waves, along with the imaginary ones?

Perhaps, it is time for Indian schools to make financial literacy a mandatory subject in high school!

Something similar to the auto sector happened in the world of real estate. The Nifty Realty index has shown an impressive performance by rising a handsome 88% from the closing prices of March 2020.

The prolonged low sentiment in the sector was followed by the arrival of COVID. Pessimism peaked quickly and prices started moving up.

Another reason for the outperformance in realty stocks is the tailwinds, thanks to COVID. Indian real estate market is very different from leading metros across the globe. Mumbai has one of the highest per sq feet rates in the world.

In such a scenario, how do you expect the commoners to afford luxury houses? Naturally, city dwellers in most Indian metros are accustomed to living in small spaces.

COVID provided reason enough for people to start thinking about buying bigger houses. Many companies have announced plans for extended work from home.

A few giants like Tata Consultancy Services have made bold announcements by giving most of their employees ‘permanent work from home. Now try to imagine the impact of this structural move.

Wouldn’t such employees think about moving away from the city centre and start looking for bigger accommodation options on the outskirts? Probably this theme is already playing out and is providing the much-needed thrust to the ailing realty sector.

What is common between the rise of metals, real estate and autos? Well, the fear was high in all three sectors.

Please look at the returns given by the Nifty FMCG index: a mere 27%. Wait, what! Is 27% Mere? To be honest, compared with 152% returns on the Nifty metal index, 27% really is modest.

What could be the reason for the relative underperformance of the FMCG index? The answer lies in the fact that FMCG played the role of a classic ‘defensive’ in that environment of extreme fear. The primary objective of defensives is capital protection, and capital appreciation is generally a secondary objective.

Let me talk about one sector which has not whole-heartedly participated in the great bull run. No surprises for guessing, I am talking about the tourism sector. What really went wrong here?

The ‘fear’ that we have been speaking about was very much there in the tourism sector as well. At this point, I must influence your thought process a bit.

The entire travel and tourism sector can be broadly divided into two segments:

  1. Business Travel
  2. Leisure tourism

The ecosystem around business travel involves the likes of three-star & five-star hotels. The level of pain that these businesses have undergone is a different league. No revenues for almost the whole year!!

And this was topped by the ongoing depreciation on fixed assets. Tough, to say the least!

The leisure tourism sector faced the same problems as the business travel segment. However, I have some food for thought for you.

Will, you do not want to resume leisure travel once all the travel restrictions are gone? Don’t you crave the yearly relaxed tours anymore? I get your answers sitting here in my room.

The need for recreation is inherent in human nature. A few months or years of forced prohibition from travel cannot change something that has been developed over many centuries.

Do not forget that humans were very originally hunter-gatherers. It was only about 12000 years back that agriculture introduced us to the concept of ‘permanent settlements’.


Long term behavioural trends are difficult to change. Crisis always creates opportunities. The current valuation in the leisure tourism sector is extremely attractive.

A few listed companies are trading close to their liquidation value. Time for you to run a quick screen on travel and tourism stocks?

Summarizing the discussion for this month, ‘extreme fear’ is a trigger enough to buy equities.

It is counter-intuitive and feels like onboarding a sinking ship. I tried proving the point by empirically giving a descending order of returns generated by various sectors.

Hope you enjoyed reading.

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