Global headwinds like tightening of monetary stance by major central banks and increasing crude oil prices, coupled with domestic concerns like firming, inflation could halt the underlying Bull Run in stocks in 2018 and bring in lot more volatility going forward, an Assocham paper noted.
"Correction in the global indices due to any or all of the factors such as- the central banks tightening globally, balance-sheet reduction of the US Fed, pressure on crude oil prices and geopolitical risks, among other factors, may impact overbought position in India, China, and other Emerging Markets in 2018," the paper noted.
India's change in yield in US dollar terms was at 36.8 per cent, compared to China that registered at 51.1 per cent. A combination of primary market growth and overall macroeconomic situation made India and China attractive.
The year 2017 had been a golden year for initial public offers (IPOs), with as many as 153 of them hitting the Indian stock market, raising around $11.6 billion.
A large number of the issues were over-subscribed, reflecting their quality and the appetite for public issues by the investors.
Asset Under Management (AUM), the paper argues, may remain a preferred choice for investors in 2018 as well, but with the bond markets indicating inflationary pressures and their upward impact on the interest rates, the dice may favour debt market and bank deposits again.
"In the backdrop of upcoming union budget in the beginning of February, followed by assembly elections in key states, the markets may witness a greater amount of volatility," said Assocham Secretary General D S Rawat.
The last year had seen a dream run for the market, led by the domestic institutional investors. During January to December 2017, DII's made the record by net purchase of Rs 907.4 billion, whereas FII's registered net withdrawal of Rs 44108 Crores from India during this period.
In 2017, stocks of certain industries such as IT and pharmaceuticals which are based on export businesses remained under pressure due to continuing disappointment by the earnings caused by the decline of US dollar to Indian Rupee throughout the year.
As far as 2018 is concerned, it is yet to be certain which sectors will lead positive trading at the exchange.
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