Sensex, Nifty set to post double-digit return for third consecutive year

The benchmark indices are set to report double-digit return for the third consecutive financial year, led by financials, information technology (IT), fast moving consumer goods (FMCG) and Reliance Industries (RIL).

Thus far in the financial year 2018 - 19 (FY19), the S&P BSE Sensex and Nifty 50 have moved up 17 per cent and 14 per cent, respectively - outpacing the 11.3 per cent and 10.2 per cent rise seen in these indices in the previous financial year.

A bulk of the these gains came in March after the foreign investors pumped in over $5 billion in hopes of Modi government returning to power post the general election scheduled for later this year. That apart, an improvement in corporate earnings going ahead also boosted sentiment.

"The rise in markets currently looks like a catch-up rally just before the 2019 general elections, especially in the case of private banks which are making new highs. NBFC stocks which took a beating post the ILFS crisis have bounced back. On the global economy front, concerns remain as regards rising oil prices and a slowdown in the global economy, which may impact investor sentiments,” said Hemang Jani, Head - Advisory, Sharekhan by BNP Paribas.

Winners and Losers

Among individual stocks, Bajaj Finance, RIL and Axis Bank have rallied over 50 per cent each, while ICICI Bank, Tata Consultancy Services (TCS), Infosys, State Bank of India (SBI) and Hindustan Unilever gained in the range of 26 per cent to 50 per cent during FY19.

On the other hand, Dewan Housing Finance Corporation (DHFL), Jet Airways (India), Vodafone Idea, Reliance Communications, Reliance Capital, Reliance Infrastructure, PC Jeweller, Manpasand Beverages and Indiabulls Real Estate are among the top losers that saw their market value dip over 50 per cent in FY19.

However, liquidity distress in the country’s capital markets, triggered by the default in September 2018 of IL&FS, saw the midcap and smallcap indices recorded their worst performance since FY12.

The S&P BSE Midcap lost 4 per cent, while the S&P BSE Smallcap has slipped 12 per cent so far in FY19. In the past two fiscals, both these indices had rallied 50 per cent and 60 per cent, respectively, as compared to 30 per cent rise in the benchmark Sensex.

Autos in reverse gear

Sector-wise, auto (down 23 per cent) and metal (down 17 per cent) indices have been the worst performers. Tata Motors, Hero MotoCorp, Maruti Suzuki India, Eicher Motors and Ashok Leyland from automobile sector tanked between 25 and 47 per cent during FY19.

MHCV (medium & heavy commercial vehicle) growth dragged in October-December quarter (Q3FY19), primarily due to the liquidity crunch at non-banking financial institutions (NBFC) along with an increase in official maximum load carrying capacity of heavy vehicles that adversely affected demand of heavy tonnage trucks.

The slowdown also impacted the auto-ancillary sector (auto components and tyres). Analysts expect the growth to remain subdued for another two quarters before recovering in Q3FY20, as pre-buying would start before BSVI implementation in April 2020.