 "Sensex, Nifty drop 9% in FY16 on FII sell-off")
Unlike fiscal 2015, which included the heady days of optimism starting in May 2014 after the blockbuster win by the NDA government led by the BJP in the general elections, the fiscal 2016 which ended today has been an eye opener both locally and globally.
The Sensex and the Nifty ended fiscal 2016 on a weak note with both the benchmark indices dropping 9% each as foreign funds trimmed positions in Indian equities for most of the months during the fiscal except March.
Foreign institutional investors which made huge investments in the previous fiscal to the tune of Rs 18.37 billion were net sellers in equities worth Rs 2.28 billion till March 29, 2016.
In the domestic market even though the macro numbers painted a picture of stability the entire euphoria waned with earnings growth failing to gain pace while exports continued their downward trajectory from the previous fiscal.
"The extended recovery across major developed economies, expectations of Fed tightening and the consequent US dollar tightening posed strong headwinds for emerging capital inflows. India was no exception despite its low current account deficit, tapering fiscal deficit and inflation trajectories," said Tirthankar Patnaik, India Strategist, Mizuho Bank
Locally, growth remained anaemic with GDP expected to rise 7.6% in 2015-16 compared with 7.2% in 2014-15. Credit growth for more than quarter in the fiscal remained in single digits, the lowest in nearly two decades.
While the sharp fall in commmodities led by crude oil globally aided in lowering input costs, revenue growth suffered mainly on account of weak aggregate demand.
Banks, especially state-owned banks saw asset quality deteriorate significantly in this extended recovery with non-performing assets rising particularly in commodity related sectors.
However, defensive sectors seem to have braced the stormy outlook during the fiscal with Information and Technology sectors along with Healthcare posting flat returns during the fiscal. Healthcare companies, especially the major ones faced pressure after the recent USFDA concerns.
Rate sensitive sectors such as Realty, Capital Goods and PSU Bank witnessed erosion of over 25%. Overall the BSE Bankex lost around 12% support by the differentiated preference between state-owned and private banks.
However, the commodity complex had divergent returns. While the Metal index dropped nearly 20% led by sharp fall in the steel segment easing global crude oil prices favoured both the oil explorers and refiners while aviation companies also returned to
profitability. Index heavyweight Reliance Industries which had sluggish stock performance for quite a long period of time witnessed gains of nearly 27%.
In the aviation space, Jet Airways gained 12% while SpiceJet zoomed 194% after the change in management with Ajay Singh taking over.
Autos witnessed a mixed trend with two-wheelers racing ahead of the passenger car segment with both TVS Motor, Hero MotoCorp and Bajaj Auto gaining between 11%-22% each.
The overall market performance suffered in January 2016 tracking a slump in global equities but bounced back in March with both the Sensex and Nifty posting double digit gains, the highest four years on renewed buying interest by foreign funds. Foreign institutional investors were net buyers in Indian stocks worth Rs 21,237 crore (till March 29).
OUTLOOK
Markets are likely to remain volatile during the fiscal 2017 with FII inflows and global events dictating the trends. Movement of crude oil prices and the trajectory of the rupee going forward will also be keenly watched. Most importantly, earnings performance will be a key factor.
"We expect earnings driven performance in FY17 boosted by some resurgence in the rural space. With industrial capacity utilisation remaining weak we would continue to expect the government to lead investment in the economy eg. roads and railways," Patnaik added.
The Sensex and the Nifty ended fiscal 2016 on a weak note with both the benchmark indices dropping 9% each as foreign funds trimmed positions in Indian equities for most of the months during the fiscal except March.
Read more from our special coverage on "MARKETS"
Foreign institutional investors which made huge investments in the previous fiscal to the tune of Rs 18.37 billion were net sellers in equities worth Rs 2.28 billion till March 29, 2016.
In the domestic market even though the macro numbers painted a picture of stability the entire euphoria waned with earnings growth failing to gain pace while exports continued their downward trajectory from the previous fiscal.
"The extended recovery across major developed economies, expectations of Fed tightening and the consequent US dollar tightening posed strong headwinds for emerging capital inflows. India was no exception despite its low current account deficit, tapering fiscal deficit and inflation trajectories," said Tirthankar Patnaik, India Strategist, Mizuho Bank
Locally, growth remained anaemic with GDP expected to rise 7.6% in 2015-16 compared with 7.2% in 2014-15. Credit growth for more than quarter in the fiscal remained in single digits, the lowest in nearly two decades.
While the sharp fall in commmodities led by crude oil globally aided in lowering input costs, revenue growth suffered mainly on account of weak aggregate demand.
Banks, especially state-owned banks saw asset quality deteriorate significantly in this extended recovery with non-performing assets rising particularly in commodity related sectors.
However, defensive sectors seem to have braced the stormy outlook during the fiscal with Information and Technology sectors along with Healthcare posting flat returns during the fiscal. Healthcare companies, especially the major ones faced pressure after the recent USFDA concerns.
Rate sensitive sectors such as Realty, Capital Goods and PSU Bank witnessed erosion of over 25%. Overall the BSE Bankex lost around 12% support by the differentiated preference between state-owned and private banks.
However, the commodity complex had divergent returns. While the Metal index dropped nearly 20% led by sharp fall in the steel segment easing global crude oil prices favoured both the oil explorers and refiners while aviation companies also returned to
profitability. Index heavyweight Reliance Industries which had sluggish stock performance for quite a long period of time witnessed gains of nearly 27%.
In the aviation space, Jet Airways gained 12% while SpiceJet zoomed 194% after the change in management with Ajay Singh taking over.
Autos witnessed a mixed trend with two-wheelers racing ahead of the passenger car segment with both TVS Motor, Hero MotoCorp and Bajaj Auto gaining between 11%-22% each.
The overall market performance suffered in January 2016 tracking a slump in global equities but bounced back in March with both the Sensex and Nifty posting double digit gains, the highest four years on renewed buying interest by foreign funds. Foreign institutional investors were net buyers in Indian stocks worth Rs 21,237 crore (till March 29).
OUTLOOK
Markets are likely to remain volatile during the fiscal 2017 with FII inflows and global events dictating the trends. Movement of crude oil prices and the trajectory of the rupee going forward will also be keenly watched. Most importantly, earnings performance will be a key factor.
"We expect earnings driven performance in FY17 boosted by some resurgence in the rural space. With industrial capacity utilisation remaining weak we would continue to expect the government to lead investment in the economy eg. roads and railways," Patnaik added.