For the first time, in the last three financial years, the equity market returns turned negative this financial year (FY12). However, the good news for Dalal Street is that in the fourth quarter, the Bombay Stock Exchange (BSE) benchmark index, the Sensex, recorded its best quarterly performance in the past six quarters.
Global factors like the euro zone debt crisis and economic concerns in the US made investors risk-averse across the world during the first nine months (April-December) of FY12. Back home, high inflation-interest rate regime, delay in government policy-making and corruption scandals soured investors' mood. The 30-stock Sensex declined around 10 per cent in FY12, after gaining a whopping 80 per cent in FY10 and 11 per cent in FY11.
However, global markets, including India, have gained in the last quarter (January - March 2012) as the European Central Bank's $1.3-trillion liquidity injection into the region's banks has reduced fears of a debt crisis in Europe for now. The Sensex gained 13 per cent in the fourth quarter of FY12.
Foreign institutional investors, which had made net investments of $23 billion (Rs 100,000 crore) each in FY10 and FY11, net-bought shares worth $9.1 billion (Rs 44,388 crore) in FY12, Securities and Exchange Board of India (Sebi) data showed.
As many as 41 per cent or 1,329 actively-traded stocks have seen over one-fourth value erosion, of which 407 stocks declined more than 50 per cent each. Among the sectors, metal, capital goods, realty, oil and gas and power are the top losers, losing 20-30 per cent each.
Fast-moving consumer goods stocks were the biggest gainers on the Street in FY12, gaining on average 25 per cent, followed by automobiles, healthcare and consumer durables, in the range of three to 10 per cent.
With the Reserve Bank of India (RBI) expected to start cutting rates and a drop in commodity prices on the back of slower global growth prospects, market experts say FY13 will be better than FY12.
“In FY13 the markets will touch a new high, as the markets have factored in all the negatives, including the political and fiscal situation. Also, from the June quarter onwards, we will see an uptick in earnings due to rate cuts, which will boost the optimism in the markets,” said Ambareesh Baliga, chief operating officer, Way2Wealth Securities.
However, a rising fiscal deficit and high crude oil prices will continue to weigh on investors' sentiment. “The government's reluctance to cut subsidy will affect the deficit and with oil prices increasing the way they are, it would upset all budget estimates. In light of these, the markets will continue to drift with no great movement either way,” said Arun Kejriwal, founder, Kejriwal Research and Investment Services.