The Covid-19 virus not only triggered a worldwide pandemic, but also opened the floodgates for investments in the country’s equity market. All in all, not only did the overall capitalisation of India's domestic market increased, the country's key indices emerged among the best performing emerging markets (EMs). Investors jumped from one assets class to the other, till the time even the US dollar became unviable due to the massive stimulus package.

Accordingly, the funnelling of such funds into the emerging markets led to a net investment of over $22 billion into India's market till now in CY2020. Besides foreign funds, the domestic lockdown, the biggest in the world, flooded the stock markets with over 60 lakh new retail investors. Additionally, a considerable number enrolled through various schemes via the MF segment. Market watchers contend that these newbie investors saw the value in stocks beyond the pandemic induced slowdown and became the real beneficiaries of the up move.

Till now in 2020, Indian markets witnessed FPI inflows of $22,281 million, which is 55 per cent higher than the flows in the entire 2019 in USD terms. However, the domestic MF houses pulled out over Rs 33,000 crore till November 2020. "Valuations are at 2SD (standard deviation) over the 10 year average, hence there is some caution on this front. However as long as interest rates continue to be zero or near zero across the globe, P/E ratios could keep expanding to levels not seen in the past," said Deepak Jasani, Head of Retail Research at HDFC Securities.

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