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Outlook for Indian Stocks in 2014-VRK100-31Dec2013

Outlook for Indian Stocks in 2014-VRK100-31Dec2013

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RamaKrishna Vadlamudi, Hyderabad, outlines the outlook for Indian stock market in 2014. He also analyzes the index returns in 2013. Compiles his thoughts for the 2014 outlook.
RamaKrishna Vadlamudi, Hyderabad, outlines the outlook for Indian stock market in 2014. He also analyzes the index returns in 2013. Compiles his thoughts for the 2014 outlook.

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Published by: RamaKrishna Vadlamudi on Jan 01, 2014
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Rama Krishna Vadlamudi, HYDERABAD 31 December 2013
www.ramakrishnavadlamudi.blogspot.com
 
Calendar Year 2013 Returns %
9.0(3.5)6.859.822.611.07.3(32.1)(19.4)(14.6)(10.0)(40.0)(20.0)0.020.040.060.080.0
        B        S        E        S      e      n      s      e      x        B        S        E        D      o        l        l      e      x        3       0         N        i        f        t       y          5       0         B        S        E        I         T        B        S        E         H      e      a         l        t         h      c       a       r      e        B        S        E         F        M       C       G        B        S        E        A      u        t       o        B        S        E         R      e      a         l        t       y          B        S        E         P        S        U        B        S        E         P      o      w      e      r        B        S        E        M      e        t       a         l
 
During the calendar year 2013, the S&P BSE Sensex 30 index clocked a return of 9 percent, while the NSE’s Nifty 50 index rose by 6.8 percent. But the BSE Dollex 30 index recorded a negative return of 3.5 percent due to steep depreciation, around 12 percent, of Indian rupee against the US dollar. Dollex 30 is dollar-linked version of Sensex. Let us see which sectors have come out winners and losers and what is in store for Indian stocks in 2014.
Sectoral performance:
 Among the sectors that have done well are BSE IT index and Healthcare indices,  with a gain of 60 and 23 percent respectively. Significantly, both these sectors have partly benefited from the rupee fall. Other things that benefited these sectors are strong export growth, investors’ bias towards companies with strong  balance sheets and better corporate governance, good potential for growth and slight recovery in the US economy. Other sectors that have done well include FMCG and Automotive sectors.
 
 
www.ramakrishnavadlamudi.blogspot.in 31 December 2013
Page 2 of 6
Real estate and public sector companies continue to be among the worst-performing sectors in 2013. The BSE Realty and PSU indices showed a negative growth of 32 and 19 percent respectively.
Returns and Volatility:
The Sensex return of 9 percent in 2013 does not reflect the volatility of stock markets in 2013. The benchmark index started the year with 19,510 and reached a peak of 20,328 (intra-day) on 17May2013. But due to fears of Fed tapering, steep fall of rupee against dollar, high current account deficit and policy-related paralysis in India; the index fell to an intra-day low of 17,922 on 27Aug2013.  After the US Federal Reserve deferring the proposed tapering, Raghuram Rajan taking over the reins of Reserve Bank of India and return of FII portfolio inflows; the Indian stock markets recovered sharply with the Sensex reaching an intra-day high of 21,484 on 09Dec2013. By the end of December 2013, the index closed at 21,171. Between May and August 2013, the Sensex fell by 12 percent. But between September and December 2013, the benchmark index rose by 18 percent, giving some cheer to scary and wary investors. During 2013, the FIIs have brought in USD 20 billion to Indian equity markets.
 Why the Difference between Sensex and Nifty Returns?
 While Sensex recorded a gain of 9 percent, the Nifty rose by 6.8 percent only. The difference is due to the fact that Sensex consists of 30 companies, while the Nifty reflects prices of 50 blue chip companies. Moreover, at the start of 2013, Nifty  was concentrated toward banks and financial companies. During July and August 2013, banking sector lost heavily—though banking stocks recovered in the last four months. For 2013, the BSE Bankex lost 9.4 percent—causing the difference  between Sensex and Nifty returns.
BSE Market Capitalization:
Total Market Capitalisation of All BSE companies:
Rs Crore USD Billion USD-INR Dec.2007 71 69 985 1 818 39.41 Dec.2010 72 96 726 1 616 44.44 Dec.2013 70 44 258 1 125 61.80
Note: Figures are end of the month; USD-INR is US dollar-Indian rupee exchange rate
Some interesting facts come out when you look at the above table. The market cap of all BSE companies at the end of December 2007 was Rs 71.70 lakh crore, converted to USD 1,818 billlion. But the market cap slumped to USD 1,125 billion
 
 
www.ramakrishnavadlamudi.blogspot.in 31 December 2013
Page 3 of 6
(a fall of 38 percent) by the end of December 2013, though in rupee terms it fell  by only 2 percent. Two factors contributed to the steep fall in market cap, in dollar terms, of all BSE companies. One is the steep depreciation of rupee against the dollar. Another factor is the fact that broader indices themselves have fallen. For example, BSE 200 index lost 4.7 percent between December 2007 and December 2013.
Performance Chart for 2013:
Indices 31-Dec-13 31-Dec-12 % change BSE Sensex 21 171 19 427 9.0 BSE DOLLEX 30 2 816 2 917 (3.5) BSE 200 2 531 2 424 4.4 BSE Mid Cap 6 706 7 113 (5.7) BSE Small Cap 6 551 7 380 (11.2) BSE Auto 12 259 11 426 7.3 BSE Bankex 13 002 14 345 (9.4) BSE Capital Goods 10 264 10 868 (5.6) BSE Consumer Durables 5 821 7 719 (24.6) BSE FMCG 6 567 5 916 11.0 BSE Healthcare 9 966 8 132 22.6 BSE IT 9 082 5 684 59.8 BSE Metal 9 964 11 070 (10.0) BSE Oil & Gas 8 834 8 519 3.7 BSE Power 1 701 1 991 (14.6) BSE PSU 5 910 7 335 (19.4) BSE Realty 1 433 2 111 (32.1) BSE TECK 5 051 3 428 47.4 Nifty 50 6 304 5 905 6.8
 As can be seen from the above table, the performance of Sensex, BSE Mid Cap and Small Cap indices differs widely—though select mid cap and small cap companies delivered good to decent returns in the latter half of 2013. It is interesting to note that mid cap and small cap stocks did better than Sensex in 2012. Investors mood changes—some years they’re optimistic about large caps and in some years they shift their bias towards mid and small cap companies. In general, it’s difficult to predict the mood swings of investors.

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