Atumultuous 2016 has finally ended with some unexpected elements. Brexit was not expected but it happened and markets soared despite that. Donald Trump was supposed to be bad for markets, hence was not expected to win. However, he won and markets saw stronger rallies.
Our benchmark indices ended the year with small gains. The interesting part is that the gains were notched up in the last week of the year, otherwise they would have been flat. For the record, the BSE Sensex gained 508.92 points in the year at 26,626.46 points. The Nifty gained 239.45 points at 8,185.80 points. (The weekly gain was 585 points on the Sensex and 200 points on the Nifty).
Amongst the Sensex stocks, the top gainer was Tata Steel. The best performing among sectoral indices was the BSE Metal index (up 26.82 per cent) on a yearly basis, while the worst performer was the BSE Healthcare index (down 14.79 per cent). The pharma companies were at the receiving end from the US FDA and large-cap and even midcap companies were under the scanner.
What does 2017 have in store for us?
The year would be tough and the first half would be under pressure, first, from poor results for the October-December quarter post-demonetisation, and second, from GST implementation or delay. There is an important meeting of the GST?panel in the first week of January and many opposition parties and states have issues with the government because of demonitisation. Initially, these issues would keep the market under pressure.
Coming to the budget, to be announced on February 1, it is widely believed that it would be reform-oriented and take major steps as a continuation of the demonetisation drive. While the Prime Monister announced some steps during his speech to the nation on December 31, announcements that are related to tax and infrastructure spending are expected to come in the budget. The fiscal deficit and inflation are under control and therefore the government has the liberty to spend increased amounts to kick start the economy.
The second half is expected to be better and it would be fair to assume that the losses of the first half would be made up in the second and then the market would record gains. The key drivers would be better tax collections, increased government spending, better compliance and India Inc recovering from the slowdown of the October-December quarter. GST would also be a kicker but whether for one or two quarters in the calendar year is not certain.
Which sectors are likely to do well?
The housing sector will be a big performer. Allied to this sector, the housing finance companies, NBFCs and banking will benefit from the government thrust on housing for all. Saturday’s announcement of interest rebate of 4 per cent for loans of up to Rs 9 lakh and 3 per cent for loans up to Rs 12 lakh will be a key driver. The huge liquidity with banks post-November would drive them to lend to this sector, which has seen relatively very low NPAs and is a fairly safe business. Secondly, the revival of business would come with a lag , by which time they would have benefited from housing loans.
The second performing sector would be healthcare. The obvious reason is that healthcare is required most by people who can’t afford treatment. The key driver is that with constant monitoring by regulators, the manufacturing standards and compliance have increased significantly. Secondly, India is emerging as a country of choice in healthcare on account of sustainable quality, and its low cost production is attracting investors from developed countries.
The third sector that I like is the consumer discretionary and non-discretionary. This sector would suffer in the immediate quarter and would show signs of recovery in the coming quarters. Going forward, this would see huge traction as the liquidity in the system improves and GST forces the unorganised sector to either become compliant or quit.
While one can analyse every sector and have reasons for and against each, the fact remains that money with an investor is always limited. He needs to invest in the best of the sectors and therefore companies.
Global markets would be hoping for the USA to continue to lead the global rally. While hope is what drives markets, the reality may be different. India would emerge a destination for global investors even if it delivers 7 per cent-plus growth. The difference would be the more compliant nature of our economy, which would change many numbers and ratios in our favour.
In conclusion, I am bullish about the prospects of 2017 but with a period of initial pain.
Wishing you all a happy, prosperous and successful 2017.
(The author is founder, Kejriwal Research & Investment Services)
Our benchmark indices ended the year with small gains. The interesting part is that the gains were notched up in the last week of the year, otherwise they would have been flat. For the record, the BSE Sensex gained 508.92 points in the year at 26,626.46 points. The Nifty gained 239.45 points at 8,185.80 points. (The weekly gain was 585 points on the Sensex and 200 points on the Nifty).
Amongst the Sensex stocks, the top gainer was Tata Steel. The best performing among sectoral indices was the BSE Metal index (up 26.82 per cent) on a yearly basis, while the worst performer was the BSE Healthcare index (down 14.79 per cent). The pharma companies were at the receiving end from the US FDA and large-cap and even midcap companies were under the scanner.
What does 2017 have in store for us?
The year would be tough and the first half would be under pressure, first, from poor results for the October-December quarter post-demonetisation, and second, from GST implementation or delay. There is an important meeting of the GST?panel in the first week of January and many opposition parties and states have issues with the government because of demonitisation. Initially, these issues would keep the market under pressure.
Coming to the budget, to be announced on February 1, it is widely believed that it would be reform-oriented and take major steps as a continuation of the demonetisation drive. While the Prime Monister announced some steps during his speech to the nation on December 31, announcements that are related to tax and infrastructure spending are expected to come in the budget. The fiscal deficit and inflation are under control and therefore the government has the liberty to spend increased amounts to kick start the economy.
The second half is expected to be better and it would be fair to assume that the losses of the first half would be made up in the second and then the market would record gains. The key drivers would be better tax collections, increased government spending, better compliance and India Inc recovering from the slowdown of the October-December quarter. GST would also be a kicker but whether for one or two quarters in the calendar year is not certain.
Which sectors are likely to do well?
The housing sector will be a big performer. Allied to this sector, the housing finance companies, NBFCs and banking will benefit from the government thrust on housing for all. Saturday’s announcement of interest rebate of 4 per cent for loans of up to Rs 9 lakh and 3 per cent for loans up to Rs 12 lakh will be a key driver. The huge liquidity with banks post-November would drive them to lend to this sector, which has seen relatively very low NPAs and is a fairly safe business. Secondly, the revival of business would come with a lag , by which time they would have benefited from housing loans.
The second performing sector would be healthcare. The obvious reason is that healthcare is required most by people who can’t afford treatment. The key driver is that with constant monitoring by regulators, the manufacturing standards and compliance have increased significantly. Secondly, India is emerging as a country of choice in healthcare on account of sustainable quality, and its low cost production is attracting investors from developed countries.
The third sector that I like is the consumer discretionary and non-discretionary. This sector would suffer in the immediate quarter and would show signs of recovery in the coming quarters. Going forward, this would see huge traction as the liquidity in the system improves and GST forces the unorganised sector to either become compliant or quit.
While one can analyse every sector and have reasons for and against each, the fact remains that money with an investor is always limited. He needs to invest in the best of the sectors and therefore companies.
Global markets would be hoping for the USA to continue to lead the global rally. While hope is what drives markets, the reality may be different. India would emerge a destination for global investors even if it delivers 7 per cent-plus growth. The difference would be the more compliant nature of our economy, which would change many numbers and ratios in our favour.
In conclusion, I am bullish about the prospects of 2017 but with a period of initial pain.
Wishing you all a happy, prosperous and successful 2017.
(The author is founder, Kejriwal Research & Investment Services)
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