2017 turned out to be a celebratory year for the Indian market till the last day of trading. The wave rose throughout the year with Sensex closing at a record 34056.83. Huge investments by domestic and foreign institutional investors contributed to this growth. The BSE Sensex ended 2017 with a gain of 29.58% while the NSE Nifty rose by 30.28%. India was the third best emerging market in the world this year after Argentina and Turkey, according to Bloomberg.
Then comes 2018…….
As per investor market response to recent events, one can easily predict it to be a challenging year for investors. During this one-year period, the Indian market became highly volatile with a large number of stocks having their prices corrected i.e. reduced to their actual true worth. A falling rupee, elevated crude oil prices and sustained foreign fund outflows have haunted the domestic equity market in the past one year.
First we’ll analyse the facts that make up 2018 and then bring a change with these lessons in 2019.
WHO beat the market:-
Lei Jun, the chairman of Chinese smartphone maker Xiaomi Corp., added $8.7 billion, with a July initial public offering catapulting him into the Top 100 of the Bloomberg index after he started the year outside the ranking. The IPO also turned three of his co-founders into billionaires. India’s Mukesh Ambani added $4 billion to his fortune and eclipsed Alibaba Group Holding Ltd.’s Jack Ma as Asia’s richest person, thanks in part to the performance of Reliance Industries
WHO lost to the market: –
Wanda Group’s Wang Jianlin, whose property conglomerate is selling assets to cut debt, lost $10.8 billion, the most of anyone in Asia. Lakshmi Mittal, who controls the world’s largest steelmaker, led the way, losing $5.6 billion, i.e 29 percent of his net worth, Dilip Shanghvi, the founder of Sun Pharmaceutical Industries, the world’s fourth-largest generic drugmaker, whose wealth declined $4.6 billion.
The WINNING stocks: –
1 TripAdvisor, Inc. (TRIP)
Opening price on Jan. 2: $34.61
Closing price on Nov. 8: $66.93
Percent gain: 93.38 percent
2 Chipotle Mexican Grill, Inc. (CMG)
Opening price on Jan. 2: $290.90
Closing price on Nov. 8: $478.30
Percent gain: 64.42 percent
3 Netflix, Inc. (NFLX)
Opening price on Jan. 2: $196.10
Closing price on Nov. 8: $317.92
Percent gain: 62.12 percent
4. Under Armour, Inc. (UA)
Opening price on Jan. 2: $13.45
Closing price on Nov. 8: $20.74
Percent gain: 54.2 percent
What $1,000 invested would be worth now: $1,542
Other winners for the year would be Microsoft (22% up) because of its cloud-centric business model by CEO Satya Nadella, Amazon 54% up because of Jeff Bezoz’s expectation crushing performance, twitter 89% up due to a show of strength in its first quarter and Netflix inc 115% up .
RECORD 2018: -Apple became the first company world-wide to hit the 1 trillion dollar market capitalisation. Apple’s strong Q3 2018 earnings report sent the stock soaring, not only because of company-wide performance but because the right segments and metrics all showed vibrancy and continued potential.
Tech stocks-We killed it
To this end, it’s generally been a solid year for many tech stocks. Therefore, though each of these businesses has been performing very well, investors shouldn’t attribute all of their gains to their respective underlying business performance. Further, it’s important to keep in mind that past outperformance certainly doesn’t guarantee more of the same in the future. That said, it often makes sense to buy companies that are firing on all cylinders — so this list of stocks may be worth a closer look.
What to expect in 2019:-
Over the past decade the federal reserve of the United States has dramatically increased the federal rate at an average of 38 base points which makes it a five fold increase over this period. Therefore, those investing trillions of dollars which proves to be a major share of the market face problems which affects the economy as a whole. Moreover, it not only reduces the money supply but also makes funds borrowing very expensive which is a major set back to the growth and development of industries. Market valuations are considered over stretched this year and if brought back to their actually valuations might result in loss a billions of dollars. Along with the trade war and increase in tariffs are forcing governments to take an aggressive stance and with the fed rates going up the situation might not end up well. Higher spending tendencies are also catching up with an increase in need for money supply in the market.
Possibility of recession:-
The current global expansion is likely to continue into next year, given that the US is running large fiscal deficits, China is pursuing loose fiscal and credit policies, and Europe remains on a recovery path. But by 2020, the conditions will be ripe for a financial crisis, followed by a global recession. Firstly, because the stimulus was poorly timed, the US economy is now overheating. The Fed will thus continue to raise the federal funds rate from its current 2% to at least 3.5% by 2020, and that will likely push short- and long-term interest rates as well as the US dollar.Secondly, the Donald Trump administration’s trade disputes will almost certainly escalate, leading to slower growth and higher inflation.Moreover, the leverage in many emerging markets and some advanced economies is clearly excessive. The emerging-market correction in equities, commodities, and fixed-income holdings will continue as global storm clouds gather. And as forward-looking investors start anticipating a growth slowdown in 2020, markets will reprice risky assets by 2019.Finally, once a correction occurs, the risk of illiquidity and fire sales will become more severe. Excessive high-frequency trading will raise the likelihood of “flash crashes”.
1)Possibility of recession is high and the existence of tariff problems will lead to a significant impact on the market
2) the market will continue to be a bull market for another year.
3)Technology stocks are still a favourite going into next year
4)Single digit returns are expected for a period of one year.
5)Long term investors will have to keep their nerves and hold on for another slow–moving year.
6)Intra-day trading will not yield much and fundamentally risky stock holders will face another nightmare.