Friday, January 1, 2016

How various asset class performed in 2015

India will remember 2015 as the year when its growth rate overtook China’s, and if analyst expectations are anything to go by, India may continue outpacing China in the future.

For India, it is creditable that the growth rate has come despite a continuous decline in exports, which fell for 12 months running. There were other headwinds as well in the form of poor monsoon, which impacted agriculture sector and rural growth.

2015 was also the year when the central bank reduced interest rates by 75 basis points, but unfortunately, the impact on the economy could not be felt as banks refused to pass it on to their customers on account of poor quality of their loan book.

While the economy might have done well in 2015, the year was not good for investors. We take a look at how various asset classes performed during the year.

Equity: 2015 was a year when the broad index fell by nearly 5.4%. Most of the sectors posted negative returns for the year. However, the markets were good for the retail investors as the small- and mid-cap indices posted over 6% growth with some of the stocks rising manifold. Investors also benefited from strong returns in the IPO market with names like Indigo, CCD, Dr Path Labs joining the listed space.

Bonds: Lately, there has been some action in the bond market. India’s 10-year sovereign bond yields headed for their biggest quarterly advance since 2013 amid concerns the government will struggle to meet its budget-deficit targets and borrow more to bridge the shortfall. With focus on growth, the government is expected to stray from its path of fiscal consolidation which is giving the bond market jitters. Akhil Mittal of Tata Mutual Fund said that during the past year, RBI has reduced rates by 125 bps whereas 10-yr benchmark g-sec yield has dropped by only 20 basis points. The main reasons for limited move were global events (Federal Reserve rate hike, Greece concerns, China currency devaluation etc) over the past one year. Domestically, low-deposit creation in banking system has also resulted in limited appetite for g-secs by banking system.

Rupee: Indian rupee fell by 4.7% to 66.19 against the dollar during the year with most of the fall taking place in the second half of the year as FIIs were regular sellers in the market. Selling was on account of fears of US Fed increasing interest rates and China reducing its peg against the dollar. Oil economies were also withdrawing funds from market which added to selling pressure.

Gold: Gold fell by nearly 10% during the year, the third year in running when gold posted negative returns. Higher US interest rates has led to money moving out of gold to the US treasury. Other factors like gold-based ETF selling and short positions in COMEX at an all-time high also contributed to the fall. Other precious metals suffered during the year. Silver was set to close the year falling by about 11%, while platinum was headed for a 27% decline, its worst annual performance since 2008. With a 31% drop, palladium was the worst performer among precious metals.

Metals: If precious metals posted a poor performance, metals led from the front in the fall. Iron ore fell by 42% during the year, copper by 26%, nickel by 43%, steel by 57%, aluminium by 18% and coal by 17.3%. A slowing global economy, especially China, resulted in the fall in metals.

Real Estate: Real Estate markets in 2015 in India failed to build positive sentiments. However, there were signs of tailwinds for the sector with PE investments touching a seven-year high and news of Cabinet approving the Real Estate Bill, 2015, has set the tone for the sector in the coming year. Cushman and Wakefield estimates about $2.8 billion or Rs 18,700 crore has been invested by private equity players in the real estate market till the end September. Add to that an estimated $4.5 billion, or Rs 30,500 crore, of NCDs — till November 2015 — and the tally is already up by 74% over last year’s Rs 17,600 crore. However, inventory continued to pile up and projects continued to get delayed, signalling the weakness in the market.

No comments:

Post a Comment