2015: damp squib for equity investors

Maruti Suzuki emerged as the biggest gainer while Vedanta was the biggest loser on Nifty 50 in 2015. While the year was a dampener for equity market investors overall, sectors such as media, pharmaceuticals and fast moving consumer goods were the top three sectoral gainers as investment strategy with respect to Indian equity investors was defensive mainly due to disappointing corporate performance and lack of business visibility.

Commodity companies were clear losers thanks to slide in commodity prices such as crude oil, metals. Nifty 50 ended the year with a negative return of 4 per cent compared with around 30 per cent return given by the benchmark indices in 2014. This is despite improvement in macroeconomic environment such as inflation, index of industrial production and gross domestic product and reduction of 125 basis points in policy rates by the RBI.

Domestically, macro-economic environment improved but that has not trickled down yet in the financial performance of India Inc. According to data from Capitaline, topline for BSE500 Index companies declined by 4.8 per cent year-on-year in H1FY16, while bottomline grew by 5.1 per cent. But, bottomline was mainly aided by margin improvement on account of lower commodity prices.

Bad monsoons also played a major role in topline growth of many consumption based companies. Lack of key reforms such as non-passage of GST Bill also disappointed investors.

Among the global factors, China slowdown and subsequent currency devaluation, selling by FIIs due to rate hike in the US and sell-off by oil rich countries due to sliding crude oil prices created havoc in emerging markets including India. As a result EMs (India to a lesser extent) underperformed most of the developed markets such as US, Japan and Europe.

“Year 2015 turned out to be a complicated year for investors with corporate performance failing markets expectation. The reality surprised the exuberant expectations of rebound in earnings from a pro-reform government voted to power in 2014 and the windfall from crashing crude oil prices,” sums up Krishna Kumar Karwa, MD Emkay Global Financial Services.

Since mid- and small-cap companies are relatively less owned by FIIs, the broader market has outperformed benchmark indices.

Flows from FIIs wilted in 2015 but DIIs emerged as big support. “Indian markets witnessed reduced net FII inflow of ₹17,829 crore during the calendar year (till December 30) compared with ₹97,055 crore inflows in 2014.

Broader market snapshot

“Domestic funds witnessed a record ₹92,023 crore inflow into their equity schemes resulting in purchase of equities worth ₹70,173 crore,” pointed out Centrum Wealth management.

Among the Nifty 500 companies, Rajesh Exports zoomed 385 per cent, thanks to its acquisition of Switzerland headquartered Valcambi, whose revenue size of $38 billion — much bigger than Rajesh Exports.

On the other hand Castex Technologies was the biggest loser as it bore the brunt of debt concerns in Amtek Auto since it is a subsidiary of latter.

Among the mid-cap stocks, three out of top five losers are PSU banks due to jump in non-performing assets. In the small-cap category, Tata Elxsi was the biggest gainer and analysts expect the company’s re-rating to continue in the long-term.

Pipavav Defence also zoomed after being acquired by Reliance Infrastructure.