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Demonetization fails to dampen returns, market shows steady progress

31 Mar 2017 | By Anish Chakraborty
Demonetization woes fail to dampen market spirits

The BSE Sensex performed remarkably this year marking a return of 17% where it oscillated between a low of 24523.20 on April 2016 and a peak of 29824.62 this year.

In the previous financial year, the Sensex had faced a plunge of 9.36 per cent, which was its worse performance in almost two decades and it saw almost 50% decline in select stocks.

In context: Demonetization woes fail to dampen market spirits

31 Mar 2017Demonetization fails to dampen returns, market shows steady progress

JourneyWhere it soared and where it faltered

The Fixed Deposit interest rate compounded yearly stood at around 7%.

In the mutual funds front the highest returning sectors were Banking at 41.30% and Infrastructure at 30.17%

Sectors that did miserably were technology (-3.89) % and surprisingly gold (-0.54) %

The Indian Sensex, it appears is running at tandem with the Chinese market, with Hang Seng index also showing return of 17%.

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Gainers, losers and all added together

Ups and downsGainers, losers and all added together

The top gainer of the market was Maruti Suzuki which saw a steep rise of 59.70% while Sun Pharma stood as the biggest laggard (down 15.33%).

In a general overview of the BSE Sensex top 30 chart, around 22 stocks made advances this year whereas 8 stocks showed a marked decline.

Radical shiftDemonetization,however, altered investing patterns

Demonetization saw a rise in investments in insurance and mutual fund schemes. Mutual funds saw a jump of 37% while insurance premium payment jumped by 31%.

However, due to cash crunch sectors such as real estate and gold slumped.

It should be noted here that real estate and gold are traditionally the investments that were allegedly used to stash ill-gotten wealth.

Not much effectPhysical cash to cashless, it's not a very bumpy ride

Demonetization, so far, has had a limited effect on the Indian economy and economists are of the belief that the same momentum can be maintained in FY18.

As India goes cashless and corporate earnings recover from a period of sluggish activity, earnings of blue chip companies are anticipated to mark a turnaround and help the valuation of their stocks.

Treading carefullyWord of caution to the investors

There is, however, caution in the wind on how the GST will affect the market post July. While GST is probably one of the biggest tax reforms in the country, there are fears that improper execution could stunt economic growth.

In the global front, policies taken by the Trump administration, on how the Brexit move pans out will also have a say on economy.

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Betting on the rain godMonsoon may yet play havoc on the economy

One more reason to be wary is the arrival of monsoon. Private sector forecaster SkyMet has already given a cautious outlook for Monsoon.

Rain or the lack of it will have a major effect on inflation in India, which is dependent on the 'rain god' for irrigation purposes.

Higher inflation can hurt corporate earnings for companies' dependent or strongly linked to agri-sectors.

keeping an eyeThe bull and bear market

In FY18, investors are expected to be bullish on private banks, consumer-related sectors like FMCG. On closer watch will be sectors that are affected by the mood of global markets.

At present the outlook is bearish on information technology, pharma and telecom sectors. The real estate sector, once a market darling, is still not looking up as yet.

What is with the bull and bear?

Bull-ish and Bear-ish are used often to define the stock market. It is a symbolic reference on how the particular animal attacks on its opponents. If the market is upbeat, it is a bull market; if its down, it is a bear market.

Market outlookIt's going to be a good year, financially

Equity markets pegged to perform well with proper capital flow via foreign investors and domestic mutual funds.

There is no major upset looming as of yet and the projections show that the market is acting steady despite demonetization.

Therefore, as for now, all predictions are betting on the Indian economy to keep and improve on the current pace and to perform well on FY18.

Sensitive index of the largest traded stocks

The word Sensex stands for sensitive index and was allegedly coined by Deepak Motwani, an analyst way back in 1989 to denote the 30 largest well established, financially sound and most actively traded stocks that represents the various industrial sectors on this platform.