From the slowing down of the Chinese economy, to the vote to exit European Union by UK, to the continued trend of ultra-low to negative interest rates among major economies globally, and demonetisation in India, to the victory of Donald Trump in the US presidential elections and finally the end of the year US Federal reserve first hike of 25 bps in short term interest rates; it’s been a year of great unpredictability.
While the global markets, as measured by the S&P Global BMI, was up 8.84% for the year, if US equities’ 12.61% return is excluded, the gain was 4.95%. S&P Developed BMI and S&P Emerging BMI posted positive total returns of 8.6% and 11.30% respectively.
Backed by rally in crude oil and metal prices globally, the S&P GSCI index (first major investable commodity index) gained 11.37% during the year 2016.
Despite various negative events, Indian equities gained during the year 2016. Backed by normal monsoon, low inflation, falling key lending rates, under control fiscal deficit and stable currency, India’s bellwether index S&P BSE SENSEX and S&P BSE AllCap (India’s benchmark index) ended the year with the total returns of 3.5% and 5.1% respectively. The majority of their gains for the year were achieved during the second and third quarters as most of the key benchmark indices ended positive during these two quarters.
S&P BSE MidCap Index was the best performing size index with the total returns of 9.3%, S&P BSE SmallCap continues to be worst performing size index with the total returns of 2.7% during calendar year 2016.
Among key BSE sector indices, S&P BSE Basic Materials posted highest total returns of 33.5% due to rise in commodity prices internationally. Cash crunch due to demonetization hurt the BSE Sector Consumer Discretionary Goods & Services most, as during Q4 it posted the worst total return of -9.9%. The year 2016 was one of the worst for BSE Sector Telecom since financial crisis, with total returns of -20.9%.
Indian Fixed Income:
Compared to calendar year 2015, Indian bond market posted higher returns in 2016 due to falling interest rates. S&P BSE India Government Bond index and S&P BSE India Corporate Bond Indices posted positive returns of 13.5% and 11.1% respectively. The S&P BSE India 10 Year Sovereign Bond Index posted impressive total returns of 14.2% outperformed S&P BSE SENSEX by a margin of more than 10.7% during calendar year 2016.
|Index Name\Period||CY 2016||Q1-2016||Q2-2016||Q3-2016||Q4-2016|
|Broad Market Index (%)|
|S&P BSE SENSEX TR||3.5%||-2.6%||7.2%||3.6%||-4.3%|
|S&P BSE SENSEX 50 TR||4.8%||-2.3%||7.7%||4.6%||-4.8%|
|S&P BSE AllCap TR||5.1%||-4.1%||8.8%||6.5%||-5.4%|
|Size Indices (%)|
|S&P BSE LargeCap TR||4.8%||-2.6%||7.7%||4.8%||-4.8%|
|S&P BSE MidCap TR||9.3%||-4.3%||10.5%||12.9%||-8.5%|
|S&P BSE SmallCap TR||2.7%||-10.6%||12.0%||8.7%||-5.7%|
|Sector Indices (%)|
|S&P BSE Basic Materials TR||33.5%||4.3%||17.4%||14.2%||-4.5%|
|S&P BSE Consumer Discretionary Goods & Services TR||5.8%||-5.5%||11.2%||11.7%||-9.9%|
|S&P BSE Energy TR||19.3%||-0.4%||0.9%||15.7%||2.6%|
|S&P BSE Fast Moving Consumer Goods TR||4.8%||-2.2%||11.0%||0.2%||-3.7%|
|S&P BSE Finance TR||8.3%||-6.5%||13.1%||11.2%||-8.0%|
|S&P BSE Healthcare TR||-12.4%||-10.2%||2.3%||4.7%||-9.0%|
|S&P BSE Industrials TR||1.8%||-7.3%||11.6%||5.4%||-6.6%|
|S&P BSE Information Technology TR||-6.1%||3.2%||-0.8%||-8.4%||0.1%|
|S&P BSE Telecom TR||-20.9%||-9.4%||0.9%||-9.2%||-4.7%|
|S&P BSE Utilities TR||12.1%||-4.9%||11.5%||1.5%||4.3%|
|Fixed Income Indices (%)|
|S&P BSE India 10 Year Sovereign Bond||14.2%||3.2%||1.9%||4.6%||3.8%|
|S&P BSE India Government Bond||13.5%||2.7%||2.7%||5.2%||2.3%|
|S&P BSE India Corporate Bond||11.1%||2.3%||2.4%||3.7%||2.2%|
The author, Mahavir Kaswa is Senior Manager, Product Management, S&P BSE Indices.