Samvat 2069 may not have been auspicious for India?s economic fundamentals, but the equity market ended the Hindu calendar year on a celebratory note with the Sensex hitting an all-time high and registering its best performance in four samvats. The Sensex ended Friday?s session at 21,196.81 points ? its highest ever close ? after hitting a new lifetime intra-day high of 21,293.88.
The 50-share Nifty closed at 6,307.20 points, within striking distance of its Samvat 2066 peak. It rallied to 6,332.6 in Friday?s intra-day trade, about 25 points away from its record intra-day high of 6357.10 touched earlier.
A strong showing from the consumption and export-driven sectors that have withstood the economic slowdown relatively well pushed the 30-share Sensex up by more than 13% this year, the highest gain since Samvat 2066.
Among the star performers were Sun Pharma, TCS, Dr Reddy?s, Tata Motors and Infosys; the laggards were stocks in the capital goods, metals and utilities sectors.
Inflows from foreign institutional investors (FIIs), which gained momentum starting September, stayed strong for most part of the year,with periods of intermittent volatility . According to Friday?s provisional data, FII inflows stood at $22.2 billion in Samvat 2069, compared with $18.4 billion last year.
While the markets ended Samvat 2069 on a strong note, the year was characterised by significant volatility with investors wary about India?s worsening fundamentals ? stubborn inflation and large fiscal and current acc-ount deficits.
In addition, concerns over a possible tapering of easy monetary policy by the US Federal Reserve led to some period of outflows, which were quickly reversed as investors chased value.
Lower valuations coupled with increased volatility offered buying opportunities across the board, say market experts. The latest pick-up in FII inflows is being attributed to better than expected corporate earnings during the September quarter, which pushed foreign flows to a six-month high of $2.6 billion. Though the benchmark indices have moved back to their peaks last hit at the close of Samvat 2066, the broader market continues to reflect the economic pain witnessed by interest rate-sensitive and capital-intensive segments including infrastructure, capital goods, real estate and banking. The heightened volatility in the markets and muted capex plans also kept primary market activity remained muted this year. The total amount raised through new share sales was about Rs 7,100 crore compared with Rs 38,650 raised in Samvat 2066.
Data showed nearly one-fifth of the BSE 500 stocks hit a new five-year low in the last three months and nearly 40 of these stocks plunged to an all-time low during the period. The market polarisation is also evident in the widening gap between the performance of mid-cap stocks and their large-cap counterparts. While their returns in Samvat 2068 were comparable, in Samvat 2069 the BSE mid-cap index declined 7% and lagged the Sensex by a wide margin.
However, experts feel that cheap valuations of such stocks increase the potential of a broad-based market rally, especially once the uncertainty surround the next general election reduces.
? Stabilising rupee and current account numbers along with the market?s adjustment towards higher interest rates have already soother investor sentiment. Improvement in fundamentals and a clear verdict in the general elections could lead to a wider market rally because a substantial section of the market is trading at cheap valuations,? said Hiren Ved, director, Alchemy Capital Management.
Recently, Nomura upgraded the Indian market to an overweight rating, terming the market as an attractive ?long-side vehicle?. ?Even India?s abysmal sub-5% GDP now offers a more upward skew of risks compared to China?s toppish-looking growth,? it said, while reducing China?s rating to neutral.
