Editor's Note

The year that changed the game

Investor exuberance and market players’ caution are cancelling each other out 

At the beginning of 2020, nobody saw the monster-coaster ride that was coming. When the coronavirus spread through China in November 2019, the assumption was that it would remain a local calamity. But, it was not to be so. It quickly fanned out and stopped the world in its tracks.

Almost all economies were hit but, for India, it was a double whammy. The country was already in the grip of an economic slowdown and the pandemic lockdown sent it into a downward spiral. Over the past few months, some pockets have made a recovery, but there is still a long, hard way to go.

After the 23.9% shrinkage in Q1FY21, GDP has contracted 7.5% in Q2FY21. RBI estimates FY21 to end with 9.5% contraction. To revive animal spirits, people are counting on demand recovery on the back of low interest rates. But, will it come through? We have witnessed many a false dawn. CEOs, private wealth advisors and venture capitalists are dealing with this uncertainty, and it’s tough.

This special edition is a bird’s eye view of how they are handling it — CEOs with their strategic priorities for 2021, venture capitalists (VCs)with their well-considered bets and the rich with carefully planned investments.

To survive an extended period of stress, corporate chieftains have made accelerating digital adoption and building resilience, their top priorities. VCs, although awash with cash, with the fresh bout of liquidity infused by central banks around the world to deal with COVID, are being selective about where they bet their money.

Predictably, they are drawn to start-ups that are beneficiaries of the digital rush in the post COVID world, such as those in edtech and SaaS. Finally, this easy money has also made private wealth advisors wary of the equity market, which has soared to a new all-time high. The advisors have tactically reduced allocation in equities.

Taken together, the market sentiment and the people who drive the earnings that inspire the sentiment, it seems like a picture of contrasts — of optimism nullified by caution.