2020 was indeed one of the most unpredictable years in the history of mankind. Coronavirus pandemic, floods, cyclones and several other man-made or natural disaster kept coming one after the other in 2020, making lives difficult for humanity. The year impacted nearly everything, including the stock market. From historic lows to eye-popping gains, the Indian stock market witnessed gut-churning fluctuations in 2020 as Sensex and Nifty kept fluctuating throughout the year.

The year had started on a bad note for the market due to the coronavirus pandemic, tensions between the US and Iran and falling crude oil prices. In March, it plunged to a historic low after the Centre imposed a nationwide lockdown. However, the Sensex and Nifty made a remarkable recovery immediately and soar to all-time highs by the end of the year.

However, the Reserve Bank of India‘s (RBI) emergency liquidity support helped Sensex recover. April saw a quick recovery of the market as Sensex zoomed 2,476.26 points as investors wagered on more stimulus measures from the government to battle the economic fallout of the pandemic.

By November, the Sensex erased its 2020 losses due to various measures announced by the government and the RBI. From November 9 to December 18, the Sensex hit fresh record highs in 22 out of the 29 sessions.

For the calendar year (till December 24), the Sensex has gained 13.86 per cent, while the Nifty has delivered returns of 12.99 per cent.

Compared to the March lows, both the indices are up by a hefty 80 per cent.

Benchmarks had another engine propelling them higher this year Reliance Industries (RIL), which became the first Indian company to reach a market capitalisation of Rs 15 lakh crore (USD 200 billion) in September.

Beginning April, the Mukesh Ambani-led conglomerate announced a slew of deals to sell minority stakes in its telecom and retail arms to marquee investors like Facebook, Google, Silver Lake, KKR, Mubadala, and Public Investment Fund of Saudi Arabia.

The company has raised around USD 25 billion so far this year as it seeks to ramp up its consumer-facing businesses. For a good part of the year, RIL almost single-handedly drove the domestic benchmarks higher in the absence of any buying triggers.

The COVID-19 crisis also forced investors to take a relook at their sectoral allocations.

“From the lows, markets started stabilising and pandemic sectors like FMCG, IT, pharma and chemicals benefitted. As the economy further opened up, growth and cyclical sectors reversed positively,” said Vinod Nair, Head of Research at Geojit Financial Services.

However, while stocks seem to have found their animal spirits back, there are also some murmurs of discontent.

Analysts say world stock markets have developed a dangerous addiction to endless money printing by central banks, and show withdrawal symptoms of a junkie at the slightest indication of a moderation in monetary stimulus.

Back home too, around half of the government’s Rs 20.97 lakh crore economic stimulus package comprised RBI’s liquidity measures.

This glut of global liquidity has pushed markets so far ahead of economic fundamentals that some are beginning to question whether the real economy matters in equity investing at all.

For example, no one would be able to tell looking at the Sensex chart that the Indian economy shrank 23.9 per cent in the first three months of FY21, and 7.5 per cent the next quarter.

Globally too, markets have been on a manic upswing even as millions have lost their jobs, small businesses are battling for survival and entire industries have been decimated.

While the real economy has been ravaged by the pandemic, most financial market indicators are ruling at stratospheric levels.

The BSE Sensex is currently trading at a price-to-earnings (PE) ratio of 32.89, the highest on record.

To put it differently, investors are paying Rs 32.89 for every rupee of future earnings of the 30 Sensex firms, compared to the previous 20-year average of around Rs 19.

Global market capitalisation — the value of all the listed stocks in the world topped USD 100 trillion for the first time ever in December.

And in a classic sign of market mania, there’s a rush of first-time investors eager to make a quick buck.

A record 68 lakh new dematerialised (or Demat) accounts were opened in India between April and October 2020, compared to nearly 49 lakh in the entire FY20, which was the highest in a decade.

Experts attribute this trend to factors like increased time at home due to the lockdown, efforts to make up for lost jobs or incomes, and also FOMO, or the fear of missing out on this rally.

This is also reflected in the growing popularity of discount broking apps like Zerodha and Upstox, which have dislodged traditional broking houses in terms of active clients.

Like the Robinhood app in the US, such platforms have attracted the tech-savvy crowd with their slick interface and mobile-first approach which has ‘gamified’ the once-stodgy field of stock market investing.

With Fed and FOMO playing in tandem, many questioned technicalities like PE and PB ratios. But, some analysts also maintain that 2020 was an outlier in terms of corporate earnings and hence valuation metrics like PE ratios this year are not strictly comparable to historical averages.

However, even they agree that every segment of the economy would have to stage a synchronous and sensational comeback to catch up with the market projections.

And if that comes to pass, 2021 would be an even more incredible year for the bourses.