Monday, December 31, 2007

Stocks this Year





The stock markets have performed exceedingly well this year, beating all expectations. The BSE Sensex gave a return of 47% to close above 20,000, surpassing the pre-year expectations in 2006 by both CNBC TV-18 and NDTV Profit. Both had seen the SENSEX crossing at most 17,000, that too by a long shot.


The Fifty-share S&P CNX Nifty gave a better return at 53%. But nothing beat the flavour of the season: Small- and Midcaps. The NSE Smallcap Index gave a stunning return of 90% this year, with the CNX Midcap returning close to 70%. This stands in-line with expectations (well, much higher than that!)

In the blue-chip stocks, RPL was the best performer, gaining over 200% this year. BHEL gained 123%, L&T rose 125%. A large number of other SENSEX/Nifty shares rose by over 100%. However, India's former-best-company Infosys was down 19% this year.

The real action was in the smallcaps. A particular food company rose by a mammoth 12,000% this year. Others gave over 2000% returns. Indeed, some companies jumped from single-digit listing prices to tripel digit trading prices!


The year had several IPOs, the prominent among which was the DLF Initial Public Offering. DLF - India's largest Real Estate Company - saw its market cap multiply in a few sessions, which led it to oust DRL to join the SENSEX.
Idea was another big IPO this year, as was India Infoline.
However, the year came with its own blues. When SEBI decided to crack down on P-Notes (and OTFS has discussed this matter before), the markets fell by 4%. This was aggravated by record crude prices, which missed $100/bbl by a whisker. However, crude is still trading above $95/bbl. To deflect this, the government issued Oil Bonds to Oil Companies, including India's largest company in this sector: ONGC (which has done very well in the markets this year).

The Bombay Stock Exchange launched a dedicated Realty Index this year, which has given amazing returns. FII investments into India touched record highs, while China's Shanghai Composite Index rose by 97% this year.

While inflation was high in the middle of the year, stringent monetary policies by the RBI not only lowered inflation but also helped India avoid the Subprime crisis in the US. Political instability also caused some major falls in the Stock markets.

In 2008, the target for the SENSEX is 25,000 (the Hong Kong Hang Seng closed the year at 28,000+). However, if GDP growth remains above 8% it could go even further up. This year has seen a slowdown in growth but it might not be so severe.

While most International markets have done well this year, with the Dow Industrials hitting record highs, Tokyo Stock Exchange's Nikkei-225 gave a negative return of 11%, closing at 15,300. It was in the second half of the year that the BSE Sensex overtook the Nikkei 225.

Rising rupee, inflation, US-woes and GDP will be some major factors determining the course of the markets next year. Another important matter will be political stability: with the Congress having lost in both Gujarat and Himachal Pradesh, the UPA Government might not go ahead with the Nuclear Deal.

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