The Sensex and Nifty notched up gains of 28% and 29%, respectively, in 2017, hitting record highs. These are the best performances by these indices since 2014, when they clocked returns of 30% and 31%, respectively. These are also the third-highest gains over the past 10 years, the highest being in 2009 (on a much lower base), when both indices clocked over 75% returns. Shrugging off losses of the past two sessions, the Sensex on Friday put on more than 0.62%, closing at a record high 34,056.83 points. The broader Nifty rose 0.50% to end 2017 a point short of a record high at 10,530.70. ICICI Securities MD and CEO Shilpa Kumar observed that apart from liquidity-led support, the markets were also driven by lower interest rates and yields, which led to an expansion in PE multiples. “In fact, 2017 was marked by the skewed tilt towards equities globally as the TINA (there is no alternative) factor upped the ante for equities, while competing asset classes (real estate, fixed income and gold) saw muted demand from investors,” Kumar said. Strong buying by local institutions, especially by mutual funds, helped move the markets. Foreign investors and domestic institutions bought equities worth, $8 billion and $13.6 billion during the year, Bloomberg data showed.
Unlike on past occasions, small investors also made good money, thanks to systematic investment plans. B Gopkumar, CEO, Reliance Securities, believes retail investors have seen a positive return of above 15% from mutual funds. “Three years back we used to say FIIs (foreign institutional investors) make more money than Indians but that trend seems to have changed,” he said. Stock-specific bets paid off big in 2017: Titan gained 163%, Tata Global put on 159%, TVS Motor returned 114%, Tata Steel rose 87% and Maruti Suzuki 83%. The reform measures undertaken by the government like the implementation of the goods and services tax (GST), bank recapitalisation and the bankruptcy law also sent a strong and positive message to investors of India’s intent to push ahead with change. UR Bhat, managing director of Dalton Capital Advisors, said several reforms had reinforced the faith of the markets in the present government to deliver. “That is what gave markets a fillip in addition to expectations of a turnaround in the economy and earnings growth,” Bhat said. A Balasubramanian, CEO, Birla Sunlife Mutual Fund, noted that many of the laws passed were ground-breaking whether the NCLT model or ARC model. “These are all fundamentally sound policies for the long term. I think the combination of these things fuelled markets,” Balasubramanian said. Arun Thukral, MD & CEO, Axis Securities, said the trend in earnings had reversed from Q2FY18 onwards and was expected to continue in H2FY18. “The real fruits of the reform of the decade (GST) would be seen in next 12-18 months,” Thukral said, adding that given the spectacular returns in 2017, expectations for 2018 should be tempered.