Heads-Up 2016: Markets- Blow already softened, time now for recoveryhttps://indianexpress.com/article/india/india-news-india/heads-up-2016-markets-blow-already-softened-time-now-for-recovery/

Heads-Up 2016: Markets- Blow already softened, time now for recovery

The BSE Sensex, however, is down 5 per cent from its close in 2014, after having gained 30 percent that year. Foreign institutional investors largely stayed away from Indian markets on account of such concerns.

Digital Broadcast of stocks figures in Mumbai. Amit Chakravarty
Digital Broadcast of stocks figures in Mumbai. Amit Chakravarty

In the concluding part of this series, The Indian Express reporters look at five different institutions from business to culture, legislature to judiciary, and read between the headlines of this year to interpret what will make news in 2016.

Looking back

At the close of the year, the Nifty at NSE was hovering around 7,900, much lower than the revised projection around 9,000 by leading brokerage houses. The market has improved on parameters such as decline in interest, softening of inflation, reduction in current account deficit and also low commodity prices, weathering a rate hike by the US Federal Reserve, an RBI rate cut and a global slowdown. The BSE Sensex, however, is down 5 per cent from its close in 2014, after having gained 30 percent that year.

Foreign institutional investors largely stayed away from Indian markets on account of such concerns. Their net investment of Rs 17,600 crore was the lowest in the last four years; in 2014 it was Rs 97,053 crore.

Looking forward

“Expected recovery in earnings and impact of various policy steps by the government will drive the markets… While there is a base effect now and interest rates are down, corporate earnings will grow in 2016 and further pick up pace in 2017,” said Harsha Upadhyaya, CIO, Kotak Mahindra AMC.

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Pankaj Pandey, head of research at ICICIdirect.com, said. “The earnings growth for FY16 is expected to be around 7.5 per cent. If commodity prices stabilise, earnings may witness a bump-up of 20 per cent in FY17 and it may push the Sensex up by 12.7 per cent by December 2016.” He added implementation of the recommendations of the 7th Pay Commission will positively impact the consumption-led economy and even the stock markets. However, “further decline in commodity prices will result in a washout of corporate earnings for FY17 the same way as seen for FY16. That is one of the biggest risks,” he said.

There is little hope, however, that capital expenditure of India Inc will rise. “Most industries are still facing an issue of excess capacity and unless there is enough demand investments won’t pick up,” said Upadhyaya.

One thing that did not happen

“While 2015 witnessed an improvement on the macroeconomic front, it did not translate into a growth in earnings for companies,” Upadhyaya said.