New start for stock markets

Vikram Samvat 2075 brought mixed results for stock market investors. During the Hindu calendar year that began on 2018 Diwali, benchmark BSE Sensex rose more than 15 per cent to close at 39,250.20 points from 34,067.40 points recorded on October 29, 2018.

Popular 50-stock Nifty rallied 13.5 per cent to 11,627.15 points from 10,250.85 points. However, the growth was limited to a select number of stocks. Further, small caps and midcaps fared badly. Some midcaps corrected by up to 50 per cent.

However, some largecaps outperformed even the market indices. The stock of oil major BPCL zoomed 90.73 per cent, the highest among all largecaps on bourses. Companies like Bajaj Finance, Titan Company, Nestle, Asian Paints, etc, saw their share prices soaring between 40-70 per cent.

Further, stock market began the new year, Vikram Samvat 2076, on a positive note. During Muhurat trading session on Sunday, BSE Sensex rose 192.14 points while NSE Nifty moved up by 43.25 points. Stock exchanges conduct Muhurat trading session for an hour on Diwali to usher in new Hindu year.

The stock markets continued their buoyancy on Tuesday, the first full trading in Vikram Samvat 2076, with Sensex rising by 582 points. Nifty rallied 159 points. The bullish market made investors richer by Rs 2.73 lakh crore on Tuesday.

But how the stock markets will fare in Vikram Samvat 2076? Analysts say it will be a challenging year for Indian stock markets. As midcap and smallcap stocks registered huge de-growth last year, there may be some upward traction in this space in the new year.

However, the country's economy and its behaviour will decide which way the stock markets will move during Vikram Samvat 2076. GDP has hit six-year low of five per cent in the first quarter of current fiscal.

The economy has been decelerating from the first quarter of last fiscal, when it registered over 8 per cent upswing, the highest during Narendra Modi regime so far. Going by the projections made by domestic and international agencies, economic growth likely to be sluggish this financial year.

Global rating agency Fitch, in a recent report, cut India's GDP growth forecast for current fiscal to 5.5 per cent. This is more than one percentage lower than 6.6 per cent it forecast for FY20 in June this year. Fitch is not alone in cutting the growth forecast.

Moody's Investors Service also slashed its growth forecast for India in FY20 to 5.8 per cent from 6.2 per cent earlier. It cited financial stress among rural households and weak job creation for lower growth. IMF, ADB and Standard & Poor's, another global rating agency, also slashed their growth forecasts.

With macroeconomic indicators also signalling deceleration in growth and slowdown, the Modi government announced several measures to infuse 'animal spirits' into the economy.

There are enough indications that more such measures will be announced in future. Broader stock markets will do well if the government succeeds in putting the economy on higher growth trajectory. Otherwise, stock markets will remain subdued over next 12 months.