 "The markets' top performer in 2015 was IPOs")
Year 2015 has not been a good year for investors who bet on frontline stocks. Withdrawal of funds by foreign institutional investors (FIIs) on account of fear of US Federal Reserves’ interest rate hike along with oil-based economies withdrawing money from the market as crude prices continued to fall resulted in a forgetful year for equity markets.
FII selling, especially in frontline stocks, has resulted in the Nifty falling by nearly 5% during the year. FII holding has been concentrated in frontline stocks as a result of which their withdrawals resulted in selling in these stocks. But flows alone are not to be blamed for the poor performance of the market. Fundamentals did not improve along expected lines, leading to disgruntled investors getting rid of their stocks.
Rather than growth in Indian economy, companies were affected more by a slowdown in global economies. Neelkanth Mishra, India Strategist, Credit Suisse, pointed out that more than half of the revenues of the top 100 listed companies are fundamentally unrelated to the domestic economy. Even the remaining revenues that are, on the surface, driven by the domestic economy are not immune to global trends. A large proportion of these come from banks that are hurt by their exposure to loans given to metal companies, which in turn are seeing pressure due to global weakness.
Sector specific movement was witnessed in stocks catering to ministries that were performing better as compared to the government in general. Companies selling their goods to railways, defence or power sector have fared much better than others.
Commodities, especially metals, were hammered in the market, in line with global commodity prices. Despite the government taking preventive action towards the end of the year, metal stocks were down by over 30% for the year.
Realty stocks reflected the mood of the sector on the ground. With home sales chugging along slowly, realty sector stocks fell by over 15% during the year. Despite the sound bites emitting from the government, precious little has taken off in the infrastructure sector as is reflected in the performance of the companies in the sector who posted a decline of nearly 10% during the year.
Defensives like FMCG (fast moving consumer goods) were flat during the year but pharmaceutical companies who faced challenges from the US FDA (Food and Drug Administration) posted over 7% growth during the year. The IT sector too, despite issues relating to the US visa regime, posted a 7% gain.
But the biggest gainer during the year was the IPO Index, which posted a 19.84% gain in 2015. A strong performance in the later part of the year by new issues like Indigo, Dr Lal Path Labs and Alkem, among others, helped investors gain.
2016 will bring in a new set of challenges for the market, with major global economies growing at a snail’s pace, Europe and Japan living on free money, and the Indian government struggling to get its act together. With a series of IPOs planned for 2016, perhaps the party will continue in the primary markets.
FII selling, especially in frontline stocks, has resulted in the Nifty falling by nearly 5% during the year. FII holding has been concentrated in frontline stocks as a result of which their withdrawals resulted in selling in these stocks. But flows alone are not to be blamed for the poor performance of the market. Fundamentals did not improve along expected lines, leading to disgruntled investors getting rid of their stocks.
Rather than growth in Indian economy, companies were affected more by a slowdown in global economies. Neelkanth Mishra, India Strategist, Credit Suisse, pointed out that more than half of the revenues of the top 100 listed companies are fundamentally unrelated to the domestic economy. Even the remaining revenues that are, on the surface, driven by the domestic economy are not immune to global trends. A large proportion of these come from banks that are hurt by their exposure to loans given to metal companies, which in turn are seeing pressure due to global weakness.
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So did companies catering to Indian economy do any better? Small and midcap companies are generally dependent on Indian economy. Companies in these categories have done better than frontline stocks, with each segment posting more than 6% growth during 2015. Within these categories there are companies which have become multibaggers during the year.
Sector specific movement was witnessed in stocks catering to ministries that were performing better as compared to the government in general. Companies selling their goods to railways, defence or power sector have fared much better than others.
Commodities, especially metals, were hammered in the market, in line with global commodity prices. Despite the government taking preventive action towards the end of the year, metal stocks were down by over 30% for the year.
Realty stocks reflected the mood of the sector on the ground. With home sales chugging along slowly, realty sector stocks fell by over 15% during the year. Despite the sound bites emitting from the government, precious little has taken off in the infrastructure sector as is reflected in the performance of the companies in the sector who posted a decline of nearly 10% during the year.
Defensives like FMCG (fast moving consumer goods) were flat during the year but pharmaceutical companies who faced challenges from the US FDA (Food and Drug Administration) posted over 7% growth during the year. The IT sector too, despite issues relating to the US visa regime, posted a 7% gain.
But the biggest gainer during the year was the IPO Index, which posted a 19.84% gain in 2015. A strong performance in the later part of the year by new issues like Indigo, Dr Lal Path Labs and Alkem, among others, helped investors gain.
2016 will bring in a new set of challenges for the market, with major global economies growing at a snail’s pace, Europe and Japan living on free money, and the Indian government struggling to get its act together. With a series of IPOs planned for 2016, perhaps the party will continue in the primary markets.
| Indices | Change |
| Nifty | -4.98 |
| Bank | -10.24 |
| Auto | -1.63 |
| Metal | -30.87 |
| FMCG | -0.14 |
| Infra | -9.68 |
| IT | 7.74 |
| Pharma | 7.65 |
| Realty | -15.65 |
| Smallcap | 6.10 |
| Midcap | 6.03 |
| IPO Index | 19.84 |