Ever been on a roller coaster ride?
It freaks us out, makes us want to throw up and reminds us of our long forgotten prayers. But the most amazing thing about it is, that it ends exactly where it started. That was Year 2016 for you.
It has been a loooong year and hence this is a looong post.
Rewind back two years – same day in 2014
On 31st December 2014, Nifty level was at 8300 and Sensex 27500. We had closed the year with a 30% gain in stock markets for the year. We were all very optimistic. Experts projected a 15% growth in the year 2015.
Last year same day - 2015
Sensex levels were at 26000, Nifty at 7900 – a 5% fall in the stock market indices. INR had lost 4.5% against the dollar, Crude oil prices were down – 33%, Gold was down – 5.8%, Interest rates were down over 1% (from 8.5% to 7.75% for 1 year deposit), Property prices were down about 2% to 3% or much more.
2015 saw a year-long, across the board SALE in the financial markets. And experts projected more fall this year for reasons they knew well.
This year - 2016
And on the last trading day of 2016, Sensex trades at 26,600 levels and Nifty at 8190 levels.
Equity markets have gained a meagre 2.9% this year. Currency lost about 0.1%. Gold gained 0.59% while silver had a good run gaining over 16% in value. Debt funds gave above average returns at about10% and no one is talking about real estate at all.
With almost flat growth everywhere, I was very tempted to just copy and paste my last year’s report. If only such dramatic events hadn’t happened this year, I would have.
The dramatic events
The main party spoilers this year were Brexit in the Europe, Demonetization in India and Donald Trump’s election as POTUS in the west. Enough and more has been written about this through the year and I am sure you don't really want to read more about it.
Debt funds negative returns in Dec 2016
In Dec, we saw equity markets remain flat while some debt funds gave negative returns. Now, that is not something that happens often. After demonetization, interest rates dropped drastically. We found SBI revising their 5 year deposit rate to 4.5%. But when RBI refused to cut interest rate in their monetary review, saying ‘we would like to wait the watch the impact of demonetization’, bond prices dropped. Hence one month old debt portfolios have shown a negative return and this is expected to normalise in the next 2 months.
And thankfully, Modiji didn't give us any great shocks in his speech last evening. Though a review of the demonetization exercise, how much money was exchanged, how much tax receipts etc would have been nice. But then, maybe he left than to Mr.Jaitley to share in his budget speech. After all the Finance Minister should have something to do too.
What to expect in 2017
Some experts foresaw that 2015 will end at 50,000 Sensex levels (prediction made in 2010) and some say Sensex will touch 100000 in 2020 - read here). That was not me and the only thing I can’t predict is the future.
But to play along I am sharing what other experts say. So, here goes…
The long term view
I don’t know where 2017 will take us. But something I definitely know is that, an average equity mutual fund investor who had invested anytime during the last 20 years and stayed invested for a full 10 years, got his money multiplied 8.5 times. And I will be happy to just be that average investor and enjoy the 8.5 times with more certainty and peace of mind.
Here is wishing you all a very very Happy New Year 2017. May you be more and more thankful for all that life gives you, this year and always.