2017 turned out to be the year of the bull with NIFTY & SENSEX returns ~28% for the full year. Nifty reached 10,000 in the month of July & despite a few consolidation phases the index has largely traded above that mark, while the Sensex traded above 34,000 in December.
The major events that shaped the markets during 2017 were as follows:
- The financial services sector was one of the biggest newsmakers of the year. A massive Rs.2.11 lakh cr recapitalization plan for public sector banks was laid out by the government in October to be carried out over two years. The Centre is expected infuse Rs.1.35 lakh cr through recapitalization bonds and Rs.76,000 cr through budgetary support and market raising. The government also brought in an amendment to the Insolvency and Bankruptcy Code ordinance in November with an aim to prevent misuse of the facility. The change prevents willful defaulters or promoters with some history of defaulters from bidding for their own or other stressed assets at a discount.
- The year 2017 could well be called the year of IPOs. Over 120 companies hit the primary market and have raised over Rs.70,000 cr, surpassing the previous high of Rs.42,500 cr raised in FY08 by some margin.
- Emerging markets like India took relief in the fact that US Federal Reserve stuck to its script of raising interest rates on three occasions by a cumulative 75bps.
- Tensions from North Korean dominated headlines through the year. In September the country reportedly tested a hydrogen bomb believed to have the capability to strike Japan or US coast. The UN has been imposing sanctions on the rogue nation.
- The ruling BJP registered massive victories in state elections this year. Earlier in March, it won a two-thirds majority in Uttar Pradesh, followed by retention of power in Gujarat and taking over from the Indian National Congress in Himachal Pradesh.
- The government unveiled the budget a month in advance to 1st February. The railway budget was merged with the Union Budget. The key development for taxpayers was the slashing of tax rate for income of Rs.2.5-5 lakh were to 5%, while there was a ban on cash for transactions over Rs.3 lakh.
- The year also witnessed a surge in prices of crude. In December oil rose above $65/bbl the first time since mid-2015 following a shutdown of the UK’s biggest North Sea oil pipeline.
- On 18th August, Vishal Sikka resigned as the CEO & MD of Infosys with immediate effect citing “a continuous stream of distractions and disruptions over the recent months and quarters… “.Sikka came under fire from Narayana Murthy, who attacked several decisions taken at Infosys besides Sikka’s supposed lavish lifestyle. The event sent the Infosys stock crashing and shook the IT sector.
- The year saw historic rollout of single tax regime in the country—goods and services tax (GST) on 1st The move ended more than 11 years of intense discussions between Centre and the states and the GST council announced four slabs of 5, 12, 18 and 28 percent rates for commodities & services across board.
The markets seem to have moved up ahead of the curve & fundamentals need to catch up in line with current stock prices in 2018. How & to what extent it happens next year will be keenly watched.
Sabyasachi Paul has been associated with equity research and advisory on equity markets in India for over 9 years & currently heads the equity research desk of Eastern Financiers Ltd, Kolkata.He also manages a portfolio on the online platform Kristal. Find link to the strategy named ‘The Tortoise’