Rates, rains, reforms buoy Indian equities

MUMBAI: Despite facing massive volatility and foreign fund outflows, the Indian equities markets managed to make gains during 2016 mainly on account of a fall in lending rates, further economic reforms, lower inflation and a healthy monsoon.

Demonetisation caused an initial hiccup but the effect soon tapered off

The two key indices closed between 1.95 per cent and three per cent higher, with nearly a third of the gains coming on the last few days of trading.

The 30-scrip Sensitive Index (Sensex) of the S&P BSE gained 1.95 per cent compared to a loss of five per cent in 2015.

The wider 51-scrip Nifty of the NSE rose by 3.01 per cent compared to a loss of 4.1 per cent in 2015.

The BSE Sensex closed 2016 at 26,626.46 points on Friday from 26,117.54 points as on December 31 last year. The barometer index touched a high of 29,077.28 points on September 8 and a low of 22,494.61 on February 29.

The wider NSE Nifty, which had closed last year at 7,946.35 points, ended 2016 at 8,185.80 points. It touched a high of 8,968.7 points on September 7 and a low of 6,825.8 points on February 29.

“The year 2016 began promisingly in comparison to 2015, but the ending has been a little different,” said DK Aggarwal, Chairman and Managing Director, SMC Investments and Advisors, a leading brokerage and financial advisory.

“The year was also one of the most volatile for domestic stock markets after the post-budget rally and a combination of domestic and global factors,” Aggarwal said.

However, the Sensex was amongst the worst performing benchmarks among the BRICS nations only after China’s Shanghai Composite Index, which plunged by 12.31 per cent during the year.

Brazil’s bellwether IBOVESPA index was the best performing with a growth of 38.93 per cent, while Russia’s MICEX benchmark gained 26.09 per cent.

In terms of positives, the year witnessed the successful implementation of the Seventh Pay Commission’s recommendations, a good monsoon and a plunge in inflation rates.

“Among positives, 2016 witnessed a prudent Union Budget, bountiful monsoon, fall in inflation and interest rates and payouts thanks to the Seventh Pay Commission which helped consumption spending,” Deepak Jasani, Head — Retail Research, HDFC Securities, said.

“Greater transparency in the banking space as far as recognition of NPAs (non-performing assets) is concerned and renewed legislative and judicial efforts in preventing the creation of fresh NPAs were the other such positive aspects of 2016.”

The equity markets were, however, struck hard by the central government’s demonetisation move and a slump in the domestic currency.