Dalal Street heads for worst ride in 4 years; foreign investors spoil party

Mumbai: After a roller-coaster ride, Dalal Street is headed for its worst performance in four years in 2015 -- when foreign investors pushed the benchmark Sensex to a life-time high before puncturing the rally by pulling out billions of dollars from their 'favourite' market.

With just four days of trading to go, the Sensex has lost 1,660 points or over six percent in 2015, after gaining nearly 30 percent in the previous year. The index had last registered an yearly loss in 2011 when it fell 24 percent.

The index, which currently stands at 25838.71 points, is also sharply down from its life-time peak of 30,024 points it scaled in March this year on a rate-cut boost from RBI.

On the other hand, the year also marked the worst single- day loss on August 24 when the Sensex took a sharp plunge of 1,624.51 points (5.94 percent) following a steep devaluation of Chinese currency yuan in the beginning of August.

However, listing of new companies in the stock market helped the total investor wealth, measured in terms of market capitalisation of all listed shares, retain its level close Rs 100 lakh crore -- albeit a shade below the mark.

There has not been much change on this front from the 2014-end level of Rs 98.4 lakh crore, although it mostly remained above Rs 100 lakh crore mark till July in 2015.

The NSE's Nifty is also down nearly 6 percent for 2015.

The major losers this year include metal, banking, realty and PSU stocks. The BSE metal index is down more than 32 percent, realty about 15 percent, banks by over 10 percent and the PSUs by over 18 percent.

However, healthcare and consumer durables have done better with smart gains in their indices.

It has been the heavy sell-off by foreign portfolio investors (FPIs), who have long regarded Indian markets as their favourite emerging market play, that turned the tables for the Indian stock markets in the second half of the year.

The net FPI inflows this year has fallen to just about USD 3 billion, as against an average of USD 20 billion invested by such investors in each of the last three years. On top of it, the FPIs have been net sellers in the secondary market and it is the investment made in IPOs that has helped the overall inflows remain in positive territory.

However, similar was the case for most other markets as global headwinds including from China had their impact almost everywhere.

Summing up the year, Alka Banerjee, Managing Director, Global Equity and Strategy Indices, S&P Dow Jones Indices, said the Indian equity markets actually benefitted from low global commodity prices and the volatility was less in comparison to the other emerging markets and 2016 promises to be an exciting year.

In terms of positives, it was RBI which kept on providing some boost with its policy actions and the year's biggest single-day rally -- gain of 728.73 points (2.66 percent) in Sensex to 28,075.55 on January 15 -- also followed a surprise rate cut by the central bank.

The market was all pumped up in the first quarter and vaulted past the 30,000-psychological mark on March 5, 2015, on the back of heavy foreign inflows. During this period, FPIs, as a mark of their determination, poured in some Rs 79,000 crore (nearly USD 12.5 billion) in equity and debt.

While positive momentum continued somewhat till the second quarter, it turned lacklustre thereafter with FPIs resorting to huge sell-off especially in equity markets.

The political setback to the BJP in Delhi and Bihar assembly polls and delay in key reforms including GST, coupled with global headwinds especially in China and uncertainty about an interest rate hike in the US, also kept the markets on the edge.

Finally when the US Federal Reserve hiked its rate on December 17, there was not much of impact as the markets had already factored in the long-awaited move.

The rupee has also been on a sticky wicket with a fall of over five percent against the US dollar this year on account
of heavy FII outflows.

The world's second-largest economy, China, continued to be a spot of bother as a slowing economy renewed concerns of a
possible hard-landing, which sent ripples across global financial markets.

The worries about Chinese macro parameters still persist, which mostly stem from high volatility in stocks, commodity
and currency markets after a surprise move by Beijing to devalue its currency yuan amid alarming debt levels.

In contrast, India finds itself in a sweet spot, thanks to its improving macro indicators and stable forex reserves.

But absence of big-bang reforms and a fledgling recovery are making investors a little sceptical, said Nemish Shah, director, Vinemi Share and Stock, a broking firm.

A low inflation helped RBI announce a cumulative rate reduction of 125 basis points for 2015 despite back-to-back monsoon failures.

Transmission of policy rate cuts is under way, but at a slower pace, Shah said, adding that it will take a while before consumption picks up. While the policy rate is down by 1.25 percent, banks have lowered their base lending rates only by around 0.56 percent on an average.