In a double-whammy for investors, the two major asset classes — stocks and gold — failed to generate positive returns in 2015 as headwinds from the global markets wiped off the positive sentiments back home.
While some mid-cap and small-cap stocks managed to hold ground, the overall market benchmark Sensex is headed for its worst performance in four years with a decline of 1,650 points or nearly 6 per cent so far in 2014. With just four days of trading left, the scenario is unlikely to change much.
The blue-chip index also hit its one-year low level of 24,833.54 in September and the plunge looked even sharper after taking into account a life-time high above 30,000-mark scaled earlier in March.
Adding to the investors’ woes, gold and silver prices also fell by 5.84 per cent and 7.83 per cent, respectively.
Gold prices fell below Rs 25,000 to hit a low of Rs 24,590 — its lowest level since 2011– in July.
“Domestic investor sentiment have been robust in 2015. It is the FPI sentiment which has taken a dent. In the last eight months especially, given the worries on the emerging markets front FPIs have sold to the extent of Rs 28,356 crore. FPI selling pressure has kept pressure on equities,” said R Sreesankar, Head – Institutional Equities, Prabhudas Lilladher Private Limited.
In 2014, the stock markets had outperformed gold and silver for the third year in a row with much better returns for the investors.
Market analysts said that fall in global commodity prices and sluggish demand added to the jittery investor sentiment.
The hype created in 2014, due to the massive victory to the BJP-led alliance in Lok Sabha elections, fell apart this year and the market corrected by 17 per cent from its highs, SAMCO Securities’ CEO Jimeet Modi said.
He, however, opined that this was “just a normal correction in a bull market”.
“The market that went ahead of valuation in 2014 got a necessary reprieve which will now act as a stepping stone for next leg of bull market which will unfold itself in 2016 and beyond,” Modi added.
On investors keeping away from stocks and all-time safe heavens like gold, Modi said, “The bull-bear cycles in commodities are of larger time frames. Typically gold has a 10-year bull market cycle, followed by equal or longer amount of time for bear market. Gold made a peak in 2013 in India and since then it has been continuously dragging down.
“Investors have had the best returns in the precious metals from 2004 to 2013, and the same kind of phenomenal cannot be expected.”
Historical data shows gold has given positive returns in 12 out of the last 15 years. Also, gold prices have risen by an average of 20 per cent over the last 10 years, against an appreciation of about 18 per cent for equities.
Gold prices have come down to Rs 25,610 per ten grams from Rs 27,200 per ten gram and silver from Rs Rs 37,000 per kg to Rs 34,100 per kg.
“Stock market gave very good returns in 2014. The Sensex and Nifty returned around 30 per cent and mid and small-cap returned around 52 and 67 per cent, respectively. Such high returns were based on expectations of GDP growth and corporate earnings turning around in 2015.
“This expectation did not materialise. Therefore, in retrospect we can say that in 2014 the market ran ahead of fundamentals,” said V K Vijayakumar, Investment Strategist, Geojit BNP Paribas.
“Domestic investors did invest heavily in 2015. The total DII (Domestic Institutional Investor) investment in 2015 till December is a whopping Rs 61,250 crore.
“This did not lift the markets because FPIs (Foreign Portfolio Investors) continuously sold because of difficult external environment and continuous downward revisions in earnings depressed sentiments. Emerging markets performed poorly in 2015. India did not prove to be an exception, in spite of our better macro fundamentals,” he added.
Experts said that slowdown in FPI investments was mainly on account of numerous global and domestic factors like concerns over rate hike by the US Fed, delay in implementation of major economic reforms and subdued quarterly earnings by corporates.
On the outlook for the Indian stock market in 2016, Sreesankar said: “India still looks good on a relative manner. We need to see the global uncertainty in emerging markets to settle. We are seeing so many devaluations, fear of defaults in EMs. Once that is out of the way, we see things improving, especially for India.”
“Indian market is expecting a better year ahead with a revival in FPI sentiments. Macroeconomic data, trend in global markets, investment by FPIs, movement of rupee against the dollar and movement of crude oil prices will dictate trend of the market on the back of reduced risks over global liquidity, correction in commodity prices to decade lows,” said Vivek Gupta, CMT Director Research, CapitalVia Global Research Limited.