The period of CY2021 so far could be termed as a year of multi-baggers where we have at least 843 number of stocks gaining by more than 100 per cent. The market when we entered 2021 was not cheap at all as the benchmark indices rallied by almost 15.45 per cent from the beginning of the year and were up by a whopping 73.50 per cent from their March 2021 lows. It was very difficult to predict a run-up of over 25 per cent after the market gained by over 70 per cent from its March lows. Now when the market is already up by over 20 per cent in 2021, investors are rightfully cautious. There are multiple triggers for the market to halt its forward march and take stock of things before it embarks on its journey northwards.
We all know that at current valuations the market is priced to perfection and any amount of disappointment in earnings may lead to a steep correction. This is exactly what has happened in October 2021. Several so-called high-growth stocks have reported positive earnings but failed to meet investors’ growth expectations as priced in the valuations. Such failure to impress investors with super growth has led to a sharp correction in the stock prices of select IT stocks and stocks from the chemical sector. Both IT stocks and chemical stocks are extremely popular with investors as the stocks from these sectors have always promised superlative performance in terms of earnings growth.
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