Published on October 18, 2013
Demystifying was 2013 – The year that Stocks
Looking Back •Diwali holidays bring with them an opportunity to take a step back. This is a good time to look back at events that influenced investments in the year gone by. Developments in 2013 give a peek of challenges that lie ahead for Indian stock markets. •Benchmark indices have not changed much as compared to the beginning of the year 2013, despite a slow economic and corporate profit growth.
How FIIs Behaved in 2013 •Foreign Institutional Investors invested over $ 13bn in 2013 in Indian equities. FIIs have hung on to their investments despite a 10% fall in the value of the rupee and their investment, witnessing the value of their portfolio decline 10% as a result. •It is possible that FIIs would continue to bring in the money. But we will have to contend with uncertainties over US debt situation and Fed taper in the near term.
Looking At Mutual Funds •Domestic Institutional Investors have been net sellers to the tune of $8bn in 2013. This indicates that retail investors in India are taking the money out of the stock market. •Equity as an avenue for investment fell to 4% of overall individual savings in 2012-13 (as mentioned in the RBI Annual report 2012 – 13). RBI data suggests that it has been falling consistently for two decades.
Corporate Performance •The year saw companies that earn revenue in foreign exchange perform better in the stock market as the rupee tumbled. Top performing companies in 2013 were from technology and pharmaceutical sector. Automobile sector companies like Tata Motors, that receive most of the revenue and profit from Jaguar Land Rover operations overseas, outperformed. •The sluggish trend in the macro-
Performance of the Macro-Economy •The Rupee’s fall due to a high current account deficit remained the dominant theme on the macro-economy front. Inflation was another highlight of the year. •As India’s exports growth struggles due to the slowdown in export markets, consistent high imports (crude oil, etc) increase the money India owes the world. This created demand for more US dollars and less for rupees resulting in the sharp fall in the rupee. •International agencies like World Bank and IMF have cut India’s growth forecast to close to or less than 4% per annum.
Reserve Bank •The Reserve Bank of India has battled high inflation through the year. It has held lending rates firm in 2013 to combat the surge in the inflation. This year Dr. Raghuram Rajan took over as the new governor of RBI from D Subbarao. •India needs to manage high growth and at the same time keep inflation low. It’s a challenge for the new governor.
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