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2014 market performance: India vs global peers

After a massive sell-off in 2013, Indian stock markets were on fire this year, touching new highs. The stock markets, which were lacklustre in the beginning of 2014, delivered big gains as the year drew to a close. Check out the numbers – the BSE Sensex gained about 30% until the last week of December. Foreign Institutional Investors (FIIs) pumped close to $16 billion (Rs 96,573 crore) into equities and $26.4 billion (Rs 2.6 lakh crore) in the debt markets. This pushed the total FII inflows to cross the $42-billion mark. However, India is not alone. China’s stock markets overtook India as the best performer in Asia for 2014. Even the US stock market indices reached record high levels. So, how does India stack up against its global peers?

Here is a look:

India:

The Indian equity markets were buoyed by the hope that the Narendra Modi government would get the economy back on track. Recent reforms in the labour, coal and insurance sectors boosted investor sentiment. The BSE Sensex rose a whopping 30% this year, its sharpest gain in five years. Mid- and small-cap indices have done much better, with 50% and 70% gains, respectively. Going forward, India is expected to continue the good show in 2015.

US:

The US economy is witnessing a recovery after the recession that followed the 2008 financial crisis. The dollar is looking up. The Federal Reserve also ended its bond-buying programme in October. These events are reflected in the stock market performance as well. The Dow Jones reached an all-time high of 18,053.71 points in December. It is up 8.8% this year.

AChina:

China's benchmark Shanghai Stock Exchange Composite Index (SSE) surged over 54% in 2014 against BSE Sensex's rise of 31% in the period. This month, the Shanghai index surpassed 3,100 points — the highest level in nearly five years. However, the economy has been grappling with falling real estate prices and weak industrial activity. Therefore, analysts are of the opinion that Chinese equity performance will not be sustainable going forward. India, in contrast, seems to be in a better position.

Russia:

Russia has been one of the worst performing markets in 2014. Falling oil prices and western sanctions over Ukraine continue to have an adverse impact on the economy. Russia’s currency, Rouble, lost 42% this year, the most in the world, according to Bloomberg. The Russian stock markets (MICEX) also posted a drop of 7.5% in 2014.

Brazil:

The Brazil Stock Market (BOVESPA) has been the most volatile market this year. Brazil witnessed two bear markets and a 38% surge in between in 2014, according to a Bloomberg report. The BRIC nation slipped into recession in the first-half of this year. But, it entered a bull phase in May, amid impending presidential elections as investors speculated that president Dilma Rousseff would be voted out and a new government would usher in economic reforms. However, she was voted again and the gains started to reverse from September.

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Corporate Sector 2014: Underperformers of the year

The year 2014 may have been a good year for the market or the economy but not every sector benefited. Some industries ended up being the losers.

Here is a look at which sectors did not performed well this year:

Metals and mining: The mining industry has been under the weather for a while since the government and courts banned mining of different minerals across states. This year, the industry received the biggest blow after the Supreme Court cancelled over 200 coal mines allotted between 1993 and 2011. Stocks of metals and mining companies tanked, especially Jindal Steel and Power. The government is now expected to auction these coal blocks again. The move also affects power companies, which depend on the mineral for production of electricity.

Manufacturing: The manufacturing industry has been the worst affected by the slowdown. Productivity has been remained low for months together. As a result, its contribution to the Gross Domestic Product (GDP) – a measure of the economy – fell to 15%. The new Narendra Modi-led government has been emphasising on the manufacturing sector. It has also tried to attract foreign investment in the sector. However, problems still remain with respect to ease of clearances and getting licenses. To address some of these issues, the government launched the Make in India programme. Clearances for proposals have picked up pace in the second half of the year, according to a Business Today report. The effects of these may be seen in the coming year.

Realty: The BSE Realty index has been one of the worst performing of the sectoral indices. This reflects the underlying state of the sector. Demand for properties remained poor, both in the residential and commercial segments. The inventory of unsold properties rose. As a result, developers also launched fewer projects this year. At the same time, property developers remained under high debt burden. The RBI too held interest rates steady to control inflation. High interest rates discourage home buyers, as their loan costs increase. However, there were some positive developments like the nod for Real Estate Investment Trusts (REITs) and Foreign Direct Investment (FDI) in the sector. Together, these two measures could help ease financial burden on developers.

FMCG: The consumer goods industry too faced a poor demand environment this year. A high growth in prices, together with a slowdown in the economy, causes a cut in consumer spending. As a result, growth of the firms too slowed. As a result, the BSE FMCG index rose about 18% this year, underperforming the Sensex, which is up 30% for the year. However, 2015 could be a better year, as inflation has eased now to comfortable levels. So, consumer spending could revive in 2015.

Aviation: It has been a mixed year for the Indian aviation sector. On one hand, two new airlines were launched in the country. On the other hand, another existing airline – SpiceJet – nearly shut down like Kingfisher Airlines. The year also saw a severe price war amongst the airlines to gather market share and attract customers. This, however, affected profitability of airlines, most of which are loss-making units. Moreover, the US Federal Aviation Administration (FAA) downgraded Indian aviation’s safety rating a notch below the top category.

Pharma: It has not been an easy year for the Indian pharma industry. Foreign regulators fined companies working abroad for millions of dollars. Not just fines, the US drug regulator also banned import of medicines from Ranbaxy’s India-based factories. Other companies too faced fines for similar reasons in US and Europe. Companies faced trouble back home too; the Indian government announced rules to control the pricing of essential drugs, a move that could affect profit margins. However, woes aside, the industry saw some big mergers and acquisitions this year, starting with the Sun Pharma-Ranbaxy deal worth over $4 billion. Pharma cos also announced new investment plans in various subsidiaries. Companies also benefited from the recovery in the US market – the largest for pharma companies in the world.

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