By Ruma Dubey
2016 calendar year for the stock market has ended and what a year of roller coaster ride it has been. Tumultuous, ecstatic, euphoric, down right depressing, lackluster, listless – we saw all the mood swings. But it ends well and that’s all that matters!
Right from 2005, the market has always ended the year in the positive except thrice – 2008, 2011 and 2015. 2008 and 2011, sentiments were at rock bottom but currently, we are nowhere near that kind of pessimistic outlook; in fact things could not better!
Notwithstanding global economic uncertainty at the moment, the Indian markets have decided to concentrate on ‘local’ facts which currently look 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 2016 known as ‘demonetization” and the hope is that the Govt will compensate us honest tax payers for the trouble we have gone through and the ‘sacrifices’ which we have made over the past 50 days.
And that in turn means that 2017 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 Q2FY17 but we will see a lot of pain in ensuing two quarters, especially Q3. Yet, the markes is taking this as a legacy of the past and to some extent, has already discounted expected poor and lukewarm performances.
Sentiments? Well, it is much better today than what we began the year with. Looking ahead into 2017, it will get better if and only if legislations get passed, reforms actually get underway. Mere Cabinet clearances mean nothing.
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.
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. 2016 ended better and let’s keep the hope alive that 2017 will end on a historic high.