Business Desk, ETV Bharat: The year 2020 saw the global economy fall into deep recession, much worse than the 2008 financial crisis, as the Covid-19 pandemic led to months of lockdown across geographies.
Consequently, a lot of portfolio churning happened as investors adjusted to the new economic reality. Money was seen flowing from one asset class to another through the year as the crisis unfolded.
As the extremely volatile year comes to an end, let’s take a look at the kind of returns generated by various asset classes in 2020:
Equities
Indian equities had a roller coaster ride in 2020. After seeing heavy bouts of selling in the first half of the calendar year, the stock markets posted a strong recovery, managing to close the year with decent gains.
The benchmark equity indices Sensex and Nifty have returned nearly 12% and 11%, respectively, year-to-date to investors after plunging as much as 37% (in March) from the levels seen at the beginning of the year.
The expectations of resumption of normal economic activities as the Unlock phase began, along with hopes of a vaccine coming soon brought back investor money into stocks.
Moreover, retail participation increased significantly as many young people spending time at home and dealing with job and income losses tried to make some money from stock market trading.
Steady domestic and foreign inflows, therefore, led to most equity indices closing the year in green.
Gold
Gold being considered the safe-haven asset had a phenomenal year as investors rushed to park money in the yellow metal in the year 2020.
It turned out to be one of the best-performing asset class returning nearly 29% to investors this year.
Gold prices in India in fact topped the Rs 56,000 per 10 gm level during August this year. Though later they saw some correction after various Coronavirus vaccine candidates showed promise in containing the disease.
The metal was last trading on MCX at around Rs 50,200 per 10 gm.
Read more: People who are infected should also take vaccine: Bharat Biotech Chairman
Fixed deposits
Bank fixed deposits (FDs) are one of the most popular investment instruments, especially among senior citizens and the middle class. Many investors prefer the safer FDs over equities or gold in risky times as the returns here are fixed.
However, lowering interest rate regime this year made FDs look unattractive. The Reserve Bank of India’s decision to cut the repo rate to a record low of 4% necessitated by the economic impact of the Covid-19 pandemic contributed towards the lowering of bank’s FD rates.
As a result, commercial public and private banks are now offering 2.9-5.5% for FDs depending on amount and tenure of the deposits compared to 5-8% offered at the beginning of the year. Senior citizens are presently being offered a slightly higher rate of 3-6.5%.
Real estate
Real estate, too, took a big hit this year due to the outbreak of the pandemic. During the first three months of the lockdown, construction activities came to a halt and significantly eroded the market of its potential buyer-base.
Homebuyers lost a significant appetite to buy property as the job market got gravely bitten, while demand for commercial property also declined as companies asked employees to work from home.
Consequently, property prices saw some correction across the country, with the extent varying from region to region.
According to a recent Knight Frank survey, India moved down seven spots in the global home price index to 54th rank in Q3 of 2020 (July-September) against 47th rank in the year-ago quarter and 43rd rank in Q1 2020 with a decline of 2.4% year-on-year in home prices.
