Yearly Wrap: Sensex, Nifty End As Asia’s Best In A Disappointing Year For Equities

India’s equity benchmarks rose for the third year in a row but the S&P BSE Sensex and NSE Nifty 50 indices capped gains this year after surging 27.91 percent and 28.65 percent, respectively in 2017.

The 30-share Sensex rose 5.91 percent and the 50-stock Nifty climbed 3.15 percent.

The pain was deeper in mid- and small-cap shares as the S&P BSE MidCap Index declined 13.38 percent and the S&P BSE SmallCap Index plunged 23.53 percent compared with a rally of 60 percent for the SmallCap Index and surge of 48 percent for MidCap Index in 2017.

The markets witnessed a selloff in February and March on account of introduction of long-term capital gains tax on equities and reclassification of mutual fund portfolios. The equity benchmarks climbed to record highs in August but sold off in September and October after India’s non-banking finance companies faced tight liquidity conditions in the aftermath of defaults by Investment Leasing and Finance Corporation on its debt.

All this while, investor sentiment was also challenged by trade tensions between the world’s two largest economies, U.S. and China.

“The Nifty would have built on the rally which peaked out in August after investor sentiment was shaken in the aftermath of default by IL&FS which led to credit not flowing or making it more expensive for various industries,” AK Prabhakar, head of research at IDBI Capital Markets, told BloombergQuint over phone.

Moreover, election results from the central part of India came as negative surprise and markets took cognisance of a resurgent opposition which further dampened the sentiment, Prabhakar said.

The next year will be highly volatile owing to the uncertainty over the outcome of general elections due in May.

“Irrespective of what fundamentals are and what companies do, political scenario will take the centre stage from January to May,” Ravi Sundar Muthukrishnan, head of institutional equity research at Elara Capital, told BloombergQuint in an interview.

Local equity funds bought a record Rs 1.2 lakh crore (about $17 billion) of shares this year, negating sales of $4.4 billion by foreigners, Bloomberg reported.

Big Nifty 50 Movers Of 2018

• Bajaj Finance was top gainer from the Nifty 50 basket of shares, the stock surged 50.57 percent despite tight liquidity conditions after the IL&FS default.
• Tech Mahindra, Tata Consultancy Services and Infosys were also among the top five Nifty gainers after the rupee declined nearly 10 percent, its worst annual performance against the greenback in five years, according to data compiled by Bloomberg.
• Tata Motors was the top Nifty loser as the stock slumped 60 percent, its worst yearly performance since 2008, over concerns regarding the future of its luxury car brand Jaguar Land Rover as Britain struggles to strike a favourable trade deal while exiting the European Union.
• Yes Bank plunged 42 percent, the most in a decade, after the Reserve Bank of India asked the lender’s Chief Executive and Managing Director Rana Kapoor to step down after a term extension up to Jan. 31, 2019. Meanwhile, the bank is still searching his successor.

Six of 11 sectoral gauges compiled by National Stock Exchange declined led by Nifty Realty Index's 33 percent drop. On the flipside, Nifty IT Index rose for the second year in a row and was the top sectoral gainer, up 23 percent.

The Indian rupee plunged 9.5 percent, the most in five years, to 69.93 per dollar making it the worst-performing currency in Asia.

Key Stories Of The Year

1. The Nirav Modi Case: How The $1.8 Billion Fraud Detected At PNB Unfolded.
2. Urjit Patel Resigns As RBI Governor.
3. Trump Eyes Even Higher Tariffs as China Trade War Escalates.
4. Walmart To Buy Controlling Stake In Flipkart For $16 Billion.
5. RBI Initiates Special Audit Of IL&FS After Delay In Repaying Inter-Corporate Deposits.