2019 calendar year for the stock market has ended and what a year of roller coaster ride it has been! The Sensex not only crossed 40k but today ended the year above 41k, while in 2018, the milestone was 36k and 34k in 2017. So compared to YoY rise from 2017 to 2018, the rise from 2018 to 2019 is huge but in terms of the best gain in one year – 2017 was the best with over 7000 points rise while 2019 was over 5000!
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; even the dampening news on the economy and falling growth rate did not deter this upbeat mood.
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 should get better from here!
Notwithstanding global and domestic economic uncertainty at the moment, the Indian markets have decided to concentrate on ‘local’ facts which, in 2020 for the first half of the year will be all about Budget and bouncing back. No doubt currently sentiments are extremely hopeful 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 a year where focus should be the faltering economy.
And that in turn means that 2020 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 up thanks to the tax cuts and we will see real improvement only in FY21. Q4FY20 is sure to show us some more pain. 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 2020, 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 Budget and what measures the Govt takes to help improve the economy. If the auto sector continues to post improvements, even if slight, MoM in Q4FY20, we can be certain that market sentiments and reality will finally be in sync. So if in 2019, it was politics which moved the markets, 2020 has to be essentially about economics – that is the pulse of the market.
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 2020 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 below. 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, it’s usually a slow day what with all the partying the night before!
2019 ended well and let’s keep the hope alive that 2020 will end on another historic high. Did someone say 45k?