Best of 2009 – Stocks

Bonanza year 2009 ended on a happy note and would be remembered for many reasons. Indian stock markets recovered remarkably from their March 2009 lows and went on to register the best year-to-date (YTD) performance in the history of Indian stock market since 1991, with more than 80 per cent return in 2009 and above 110 per cent from their March lows. But it was not all rosy for the investor community, especially for retail investors, with some of them managing the bull ride and a majority missing it.

Indian key benchmark indices, BSE’s Sensex and NSE’s S&P CNX Nifty, moved northward from a low of 9,647.31 and 2,959.15 as on Dec. 31, 2008 to 17,464.81 and 5,201.05 as on Dec. 31, 2009 respectively, a splendid gain of more than 75 per cent for both bourses. Similarly, stock prices too multiplied; some stock prices tripled or even more. The ‘double dhamaka’ was common among all stocks. The fundamentally-strong stocks did exceptionally well, beating their own all-time highs of 2007-08 boom. However, the rally was driven by foreign inflows rather than domestic inflows. The foreign investments touched $17 billion – an all-time high – in 2009, thanks to the continued low interest rate regime in the developed economies which prompted FIIs to invest in the developing countries. Despite India ranks among the countries with high domestic savings rates in the world, Indian stock markets remain largely dependant on foreign inflows. Indians are still not taking to stock trading in a big way, either directly or through mutual funds. Currently, only 7 per cent of the total savings goes into mutual funds and the rest into other non-equity instruments; bank fixed deposits lap up a major share.

Looking for a Demat Account – Click here

Now let’s check out the performance of stocks listed on NSE’s index S&P CNX Nifty – one of the highly-traded indices in India – which comprises 50 well diversified stocks from 22 sectors of the Indian economy.

The list of top performers comes as a surprise. The auto sector which was on the verge of collapse in 2008 revived dramatically in 2009, thanks to the government’s active support in the form of allowing increased depreciation and other policies. Tata Motors and Mahindra & Mahindra clocked the highest returns of 395.18 per cent and 293.75 per cent, each. Though Tata Motors is still reeling under the debt of Jaguar Deal it hopes to avert debt crisis with the help of increased sales activity and ‘Nano’ magic, surpassing the last boom period. The steel sector too made a dramatic turnaround. SAIL and Tata Steel gained 211.87 per cent and 184.39 per cent, respectively. Moreover, these two emerged as the largest in the world in terms of profit, leaving behind steel giant Mittal Steel. IT stocks too gave a decent return. In comparison, IT-dominated mutual funds have provided the highest return in the same year. However, telecom stocks are bleeding as companies are facing an added revenue pressure due to one-second billing.

But as we always advise, investors should not take into account only the past year’s performance to select stocks. The other factors they need to look at are Price/Earnings ratio (PE), Price/Book value (PBV), Return on Equity (RoE) and other fundamentals of a company. Though the current valuations may not look cheap and attractive enough, the growth saga will continue for the domestic markets. So if you are looking at a long-term investment, equity investment will serve your purpose.  Happy Investing!

Related posts:

1. Best of 2009 – Mutual Funds
2. Best of 2009 – ULIP Funds
3. RBI exits loose monetary policies
4. State bank of India (SBI) home loan vs Housing development finance corporation (HDFC) Home loan – interest rate war is on!
5. LIC Jeevan Anand – Review