2015 ENDS IN THE RED - HOPE IS THE ETERNAL PARTNER OF 2016!

By Ruma Dubey

2015 calendar year for the stock market has ended and though it ended the day in the green, with a good over 150 points jump, it ended the Year with a loss. This is only the third time that the market has ended the year in the red – the only other three times was first in 2008, then in 2011 and now in 2015.  Those two times, sentiments were at rock bottom but currently, we are nowhere near that kind of pessimistic outlook; in fact things have actually been looking much better than what it did in 2011. Yet, this ending in the red is a repercussion of the FIIs moving out with Fed reversing the interest rate cycle.

Notwithstanding global economic uncertainty at the moment, the Indian markets have decided to concentrate on ‘local’ facts which currently look better than most other parts of the world. No doubt currently sentiments are extremely positive and expectations are high that the Govt will welcome the New Year with some big bang, bold, reforms. And that in turn means that 2016 most certainly, from today’s vantage viewpoint, looks very optimistic. Now that’s a good note to end a year on!

Three things make a market – earnings, valuation and sentiments. Yes, earnings were not great in Q2FY16 and things do not look very good for Q3FY16. Yet, the markes is taking this as a legacy of the past and to some extent, has already discounted expected poor and lukewarm performances.

Sentiments? Well, it is much better today than what we began the year with. Looking ahead into 2016, it will get better if and only if legislations get passed, reforms actually get underway. Mere Cabinet clearances mean nothing.

And that leaves us with valuations. This has become a moving target. Most of the A-grade stocks or blue chips as we call them and quality mid-cap stocks have run way ahead of their fundamental valuations. But analysts say that today, that benchmark alone will not do. With value of rupee going down – we are able to buy lesser things with the same Rs.100. This in turn means that stocks too cannot be valued only on the basis on PE. Yet, what is certain is that some stocks which are at over 100 PE, will give you lesser returns compared to a mid-cap or small cap quality stock. So you will get your value for money only in these mid/small cap stocks.

A good year makes us look forward to the New Year, with hope that it will bring in good cheer. So keep the cheer and keep the hopes up. Take a look at the table given. Statistics never lies and what we see is that every year, despite the circumstances, ends in the green.  And the first day of every New Year, always opens higher. 2015 ended better and let’s keep the hope alive that 2016 will end on a historic high.