‘Terrible' and ‘peculiar' is how market-men described calendar 2011. The benchmark indices fell 24 per cent and the Indian market was among the worst performer in the world during the year.
The BSE Sensex closed on Friday — the last trading day of 2011 — at 15,454.92, while the Nifty closed at 4,624.30. On January 3, 2011 — the first trading session of the year — the Sensex had ended the day at 20,561 and the Nifty at 6,157.
On Friday, both the Sensex and the Nifty closed down 0.5 per cent. The markets opened positive on the back of good global markets rally, but failed to maintain the momentum due to lack of follow-up buying, said marketmen.
Market experts are of the opinion that high interest rates, rising inflation, leadership crisis, slower GDP growth rate and the depreciating rupee still continue to be major concerns. The year started with rising crude oil prices due to political turmoils in oil-producing countries such as Libya. By then Europe had already become a worry with countries like Greece and Ireland having run up huge debts. But what triggered the fall in the markets was the August downgrade by Standard & Poor's of the US ratings. Soon, markets the world over lost ground. Indian markets followed suit.
The depreciation of the rupee was the last straw for the Indian markets. The falling rupee, accompanied by rising crude oil and fertiliser prices, squeezed profit margins of companies. The BSE Bankex fell 32 per cent this calendar year, while IT and pharma indices fell 15.62 per cent and 13.2 per cent respectively. The BSE FMCG index, the best performing sector for the year, grew about 9.3 per cent during the year. Volumes in the cash market dropped through the year while that of the derivatives market increased. The trades in the cash market fell 38 per cent, from 18.43 lakh on January 3, 2011 to 11.52 lakh on December 30, 2011.
There was not good news in the IPO market either. According to estimates, a total of Rs 14,000 crore was mobilised through IPOs. “IPOs finished up the wealth of the investors. Retail investors were caught at the fag end of the bust. Most of the scrips are trading 70-80 per cent below their listing prices,” said Mr Chokkalingam G., Executive Director & Chief Investment Officer, Centrum Wealth Management.
FIIs were net sellers of equity for Rs 26,873 crore during the year on both the exchanges, while domestic investors were net buyers for Rs 2,781 crore. Retail investors on the BSE were net sellers for Rs 4,125 crore.
“This year was terrible for our markets. Next year may also start on shaky ground, but the second half of the year is expected to be better. The main concerns for now include high inflation and high interest rates. Corporate earnings need to grow, only then will the confidence among the investors come back,” said Mr Raamdeo Agrawal, Joint MD, Motilal Oswal Financial Services.