Some food for thought
"We live in an age of universal investigation, and of
exploration of the sources of all movements."
—Alfred de Vigny (French Poet, 1797-1863)
Word for the day
Impedimenta (pl noun)
Baggage or other things that retard one's progress, as supplies
carried by an army, e.g., the impedimenta of the weekend skier.
FY19 - The Year That Wasn't
Financial Year 2019 has come to close. For financial investors
in India this year has been rather disappointing, as both equity and debt investments
have returned low returns.
- Despite a late rally in equities, for the year FY19, Nifty returns are ~13%, where as midcap -4% and smallcap -15% have yielded negative return despite the benchmark indices ending the year ruling close to all time high.
Market breadth was accordingly terrible for FY19. Among NSE
listed issues, four issues declined for every one gainer during FY19. Even for
Nifty 500, the advance decline ration was poor at 1:2.
- For Nifty 500, the entire yearly return of 6.6% has come only in the month of March 2019.
- Private banks contributed for most of the Nifty gains, as bank Nifty sharply outperformed all other benchmark indices. Energy led mostly by RIL, was another outperformer for the year. Sugar was another sub segment that did very well during the year. Realty, metals, auto and media sectors were major underperformers.
- Amongst debt funds also, liquid funds have provided returns better than corporate bonds and gilt funds. None of the debt fund category could match the benchmark 10yr yields. The benchmark 10yr yield witnessed a large move during the year, but appear settling at marginally lower level (7.32%) as compared to the level a year ago (7.42%). Hybrid funds and gold have performed even worse.
- Foreign funds were net sellers in Indian equities during FY19. However, domestic funds injected more than US$10bn on the back of strong domestic flows.
- INR weaken on the back of negative FII flows and worsening current account, though the fall was stemmed as inflation stayed low.
- RBI changed its monetary policy stance twice during the year. In 1QFY19, the RBI changed the stance from "neutral" to "calibrated tightening" and hiked the policy rates by 25bps each twice, in June 2018 and August 2018. In February the it has changed the stance again to "neutral" by cutting the policy rates by 25bps. However, insofar as the real cost of borrowing is concerned, India witnessed a sharp jump in FY19 as inflation stayed sharply below the target levels.
In global markets, the major story of the year was trade
tensions between US and China, leading to sharp gains in USD assets (USD,
Equities and Bonds) while Chinese equities suffered due to demand slow down.
- S&P500 (+6.7%) was notable outperformers in global markets. Chinese equities are down over 5%. European equities remained mostly flat during the year.
- Crude prices remained volatile and are ending ~4% lower on yoy basis. Copper also lost ~5.6%. Silver lost over 5%, while gold is ending almost unchanged.
- USD Index gained over 7.5%, Euro (-8%) and Yen (-3.6%) declined vs. USD.
- Bond yields gained sharply in US, Europe and Japan as growth slowed down forcing central bankers to change their policy stance.
