Stock markets bid adieu to 2017 on a bullish note with the benchmark Sensex gaining 7,430 points, or 27.90 per cent, and investors making huge notional profits of Rs 45.50 lakh crore as the market capitalisation surged in a year marked by the impact of demonetisation and implementation of goods and services tax (GST). However, experts have cautioned that the year 2018 may not be that smooth for the stock markets and forecast a bumpy ride for investors in the wake of rising inflation, fiscal deficit and the general elections in 2019.
The BSE Sensex on Friday rose 209 points to finish at a fresh life-time high of 34,056.83 on the last trading day of 2017, rounding off a remarkable year which saw the benchmark surging by 27.9 per cent from 26,626.46 on the last trading day a year ago. The market capitalisation of BSE-listed companies soared by Rs 45.50 lakh crore to Rs 151.73 lakh crore in 2017. The 30-share Sensex touched its lifetime high of 34,137.97 on December 27.
The broad-based NSE Nifty the advanced by 28.7 per cent during the year 2017. On Friday, Nifty rose 52.80 points, or 0.50 per cent, to end at 10,530.70 after trading between 10,538.70 and 10,488.65. The benchmark indices posted their best annual gains in the last three years in 2017. The mid and small-cap indices rose by a whopping 47.3 per cent and 57.2 per cent each respectively.
Arun Thukral, MD & CEO, Axis Securities, said, “2017 has been phenomenal in terms of returns and all the three indices — large caps, mid caps and small caps — reported excellent performance. We have seen the corporate earnings reversing the trend from Q2FY18 onwards and the second half of the year is expected to continue the direction amidst improving consumption led demand on the back of good monsoon in 2017.”
Though the economy was hit by the demonetisation of high value notes and GST implementation, leading to a decline in the GDP growth, stock markets overcame these hurdles and forged ahead. “It was an exceptional year for equity markets with noticeable contribution from the domestic investors. We’re hopeful that this momentum will extend further, with the earning expectations turning into a reality. We advise participants to focus on themes now as we’re seeing rotational buying across the board,” said Jayant Manglik, President, Retail Distribution, Religare Securities.
Sameet Chavan, chief analyst, Angel Broking, said, “undoubtedly, the year belongs to mighty bulls as we saw massive wealth creation right from the word go. There were a couple of hiccups during the year; but they eventually turned out to be whipsaws as the index kept on enjoying the bull run to eventually conclude the year at record highs. Now, whatever has happened in 2017 is history. The question lies what’s next and is the same run going to continue in the new year.” One reason for the rally in stocks was the huge investments made by mutual funds which witnessed huge inflows into their kitty.
Analysts have cautioned that the market may experiences a bumpy ride in the new year. “If we look at it from a longer perspective then there is no second thought about the continuation of this bull run towards 11,000 (for Nifty) and beyond. But, we do not expect the journey to be as smooth as it has been throughout this year. In between we are likely to see decent pauses and hence, one needs to be prepared for it because timing such halts has become a nightmare. Any decent declines during the year is likely to be a good buying opportunity for investors having longer term horizon,” Chavan said. On the other hand, short term traders need to be very agile and selective while picking their trades.
Experts said 2018 is being ushered in amidst macro concerns like rising crude oil prices, higher inflation and an increase in the government borrowing programme which is leading to some slippages on the fiscal consolidation path. “The real fruits of the reform of the decade — GST — would be seen in next 12-18 months as things get sorted out, tax revenues improve and consumption rises following a drop in prices for the end users. We expect markets to do well as the corporate earnings improve going forward as we move ahead in the year but given the spectacular returns in 2017, we should temper our expectations for 2018,” Thukral said.
Vinod Nair, Head of Research, Geojit Financial Services, said, “the market surprised the investors with a positive note on the final trading day of 2017. Expectation of a pick up in third quarter earnings and strengthening of rupee supported the sentiment. Focus on upcoming union budget and government’s reforms will direct investors to turn sector or stock specific. We feel that though the outlook on main indexes is moderate in the short to medium-term, the broad market will maintain its vibrancy as businesses flourish.”