2018 calendar year for the stock market has ended and what a year of roller coaster ride it has been! The Sensex not only cross 30k but today ended the year above 38k, while in 2017, the milestone was 34k! That’s a huge achievement for one year! Tumultuous, ecstatic, euphoric, down right depressing, lackluster, listless – we saw all the mood swings. But it ends well and that’s all that matters! And the theme throughout the year remained bullish with great doses of optimism; it was only when the crude prices soared that the mood got really somber and pessimistic.
Right from 2005, the market has always ended the year in the positive except thrice – 2008, 2011 and 2015. In the years 2008 and 2011, sentiments were at rock bottom but currently, we are nowhere near that kind of pessimistic outlook; in fact things could not be better!
Notwithstanding global economic uncertainty at the moment, the Indian markets have decided to concentrate on ‘local’ facts which, in 2019 for the first half of the year will be all about elections. Yet, currently the outlook in India is better than most other parts of the world. No doubt currently sentiments are extremely positive and expectations are high that the Govt will welcome the New Year with some big bang, bold, reforms. We have gone through a gargantuan experience in 2017 known as ‘GST” and the hope is that the Govt will compensate us honest tax payers for the trouble we have gone through in the ensuing Budget and usher in some growth through infra build. That’s the least they can do in an election year.
And that in turn means that 2019 most certainly, from today’s vantage viewpoint, looks very optimistic. Now that’s a good note to end a year on!
Three things make a market – earnings, valuation and sentiments. Yes, earnings were just beginning to look up a bit in Q2FY18 but we will see some more pain in ensuing two quarters, especially Q3. Yet, the market is taking this as a legacy of the past and to some extent, has already discounted the expected lukewarm performances.
Sentiments? Well, it is much better today than what we began the year with. Looking ahead into 2019, the first half will be volatile with similar ups and downs. For now, crude oil is expected to behave and that, to some extent will provide some succor. But the entire mood of the market depends on the outcome of the elections; if its BJP again with a thumping victory, then there will be no stopping the index but if it turns out to be a hotchpotch mahagathbandhan, then the southward journey of the index will have no anchor. So more than fundamentals, only politics will be the theme on which the markets will move in 2019, for the first half of the year for sure.
And that leaves us with valuations. This has become a moving target. Most of the A-grade stocks or blue chips as we call them and quality mid-cap stocks have run way ahead of their fundamental valuations. But analysts say that today, that benchmark alone will not do. With value of rupee going down – we are able to buy lesser things with the same Rs.100. This in turn means that stocks too cannot be valued only on the basis on PE. Yet, what is certain is that some stocks which are at over 100 PE, will give you lesser returns compared to a mid-cap or small cap quality stock. So you will get your value for money only in these mid/small cap stocks. So the hunt for such “penny” stocks will continue into 2018 too.
A good year makes us look forward to the New Year, with hope that it will bring in good cheer. So keep the cheer and keep the hopes up. Take a look at the table given. Statistics never lies and what we see is that every year, despite the circumstances, ends in the green. And the first day of every New Year, always opens higher. 2018 ended well and let’s keep the hope alive that 2019 will end on a historic high.