India’s stock market turned in a relatively good performance in 2015 — although in rupee terms returns were a negative 5.4%, dollar returns outdid those from peer markets. The Sensex lost about 10% in dollar terms, but fared better than the Taiex, Jakarta Composite, SET Index and Bovespa (Brazil), which lost between 14% and 42%.
The fall in the Sensex (in rupee terms) is the first since 2012 and in sharp contrast to the spectacular 30% surge in 2014. It left India’s market capitalisation smaller by $46 billion at $1.51 trillion. China’s Shanghai Composite clocked in a gain of 4.6% in dollar terms even after losing more than a third of its value from 2015 highs.
To be sure, the uneasiness in world markets, led by concerns over the slowdown in China, collapse of commodity prices and a fragile recovery in the Eurozone, also weighed on Indian equities. But, it was probably the uneven recovery in the Indian economy, together with the slowing pace of reforms, that left stocks subdued. Analysts acknowledge it may take longer for the government to carry out legislative policy changes, including the GST, land and labour reforms.
“We expect policy makers in India to be fairly active in 2016, with the focus on building infrastructure, changing India’s age-old tax regime and lowering nominal interest rates further…,” said Morgan Stanley in a strategy note dated December 14.
These expectations notwithstanding, unlike its bullish predictions for benchmark returns for 2015 – Sensex target of 33,000 – the brokerage anticipates moderate returns in 2016 as it has assigned 50% probability for the benchmark to end the next year at 28,000.
Sectorally, while metals, banking and capital goods companies remained laggards this year, consumption and defensive stocks outshone the market with stocks such as Maruti Suzuki (up 38%), Lupin (28%), and Asian Paints (17%). BPCL was the best-performing blue chip stock this year. On the back of a 36% decline in crude oil prices, the stock has yielded more than 38% return this year.