The year 2014 has a mere three trading sessions to go and as of current the SENSEX is up over 28% while the NIFTY is up over 30% during the year. India was the top performing market till a month ago before a superlative performance from China in November helped it to overtake India and become the top performer. The worst performing is Russia plagued with sanctions, falling crude prices and last but not the least the currency which saw the Rouble crash in this month.
Sitting and reflecting on year end and year ahead couple of questions crop up. What will happen next year and will 2014 be repeated as far as India is concerned. I believe that though 2014 has been a great year and 2015 will eventually be a greater year, stock market performance where returns of 30% have come may not happen. The pessimism of last year coupled with high inflation and uncertainty of election outcome in May elections has been replaced with optimism, substantial drop in inflation and a single party majority in Lok Sabha after 30 years. To add the icing on the cake has been the fall in crude prices to a more than four year low.
Steps taken and to be implemented in 2015 will be the stepping stone of reforms in the coming years. Clearance and restarting of stalled projects would add to GDP and the overall improvement in the economy, but a stalled project takes 2-3 quarters for the cobwebs to be removed and the project brought back on rails. Similarly the usual stalling of both houses of parliament has now ben refocused on just the Rajya Sabha as in the Lok Sabha there is a majority and stalling the house doesn’t work. Come budget session, I believe the allies of NDA from within or outside will increase and will make things more comfortable.
This budget will see changes and the fiscal deficit may show signs of improvement, a lot of which has come unexpectedly (falling crude prices). This has helped the government raise excise duty and virtually eliminate subsidies on petrol and diesel completely. These two fuels account for more than 85% of the total fuel basket. LPG or cooking gas prices have come down substantially as well.
GST bill has been tabled and should become law in some time. The introduction of this into the economy will act as a great booster for GDP and could boost the same by anything from 1.5% to 2%. However it not happening tomorrow and the most optimistic timeline could be October 2015 or April 2016. Election results in J&K have thrown up multiple combinations and permutations. One thing is very clear that the state needs money to develop and with BJP putting up its best ever performance in the state with 25 out of 87 seats, there being part of the state becomes imperative. The good thing is that it will add allies to the NDA when the next session of parliament begins.
Coming to the year ahead there could be a spate of IPO offerings but the going would be good only so long as pricing is kept reasonable and investors make money. It’s great for merchant bankers to say that capital market investment is risky and only those with risk taking ability alone must come, but when issue after issue quotes in the secondary market at less than half the issue price, some soul searching has to be done. Is there any point is killing the goose that lays the golden egg?
Well great times ahead but level of exuberance needs to lowered a few notches. While money making opportunities will always come expectations need to be tempered and above all one will have to make money the hard way, not as easy as in 2014.
Wishing all a Happy and prosperous New Year 2015.