The calendar year 2019 has been far better than 2018 in terms of stock returns, though the up move was not broad-based as seen in 2017. The BSE Midcap and Smallcap indices itself had rallied 50-60 percent in 2017.
Favourable global cues, easing trade tensions, and FII inflows boosted markets. In fact, the rally was also attributed to government initiatives to support the slowing economy.
"Corporate tax cut is a massive change and is a long-term story, but there is more policy action needed. We are betting that earnings will catch up with valuations," Ridham Desai, Managing Director at Morgan Stanley India said in an interview to CNBC-TV18.
The BSE Sensex surged 15.5 percent and hit a record high of 41,809.96 on December 20, thanks to the rally seen since September 20 the day when the corporate tax rate was cut. The BSE 500 index also joined the party with 8 percent gains.
More than 130 stocks out of BSE500 registered double digit-gains of which top 35 stocks gained 50-220 percent during the year.
Among them, the top five ones - Adani Green Energy, AAVAS Financiers, Reliance Nippon Life Asset Management, HDFC Asset Management Company, and CreditAccess Grameen were real wealth creators, rallying 104-220 percent.
On the BSE Sensex front, advance: decline ratio was 18:12. Top nine stocks in Sensex - Bharti Airtel, Bajaj Finance, ICICI Bank, Reliance Industries, Kotak Mahindra Bank, Asian Paints, HDFC, HDFC Bank and Axis Bank - shot up 20-56 percent in 2019.
Experts expect 2020 to be better than 2019 and say the rally which was restricted to few select stocks could be broadened to mid, smallcaps.
"We believe 2020 would be a year of earning normalization. Over the last few years, headline profit growth numbers had been much muted while EBITDA level growth was quite decent. This has happened due to multiple one-offs large provisioning or one time losses to various companies. For 2020 while sales number would be in high single-digit but profit growth should be close to 20 percent," Vineeta Sharma, Head of Research at Narnolia Financial Advisors told Moneycontrol.
Ajit Mishra, VP Research at Religare Broking also believes that the markets would maintain its positive bias given the government's constant focus on reviving the economy and positive global markets. "We expect more measures by the government in the coming months to revive consumption. On the global front, the easing of trade tensions and US Fed dovish stance would make economic recovery faster than expected."
In terms of wealth creators, he believes that there would be more stocks in 2020 that would outperform due to inexpensive valuation of the broader market and anticipated economic recovery that would spur growth for these companies.
The rally is also expected to be aided by foreign inflow, which is expected to be big in 2020 due to stimulus by several global central banks. FIIs poured in more than Rs 25,000 crore since October.
"We expect the market to be liquidity driven in the mid-term. The budget for the fiscal year 2020-21, which will be presented on 1st February 2020, is expected to tackle economic slowdown and boost growth. The government is also expected to lower the personal income tax rates which would result in additional net disposable income and hence will enhance the demand and supply of goods and services," Gaurav Garg, Head of Research at CapitalVia Global Research Limited- Investment Advisor said.
He remains positive on the broader market and expects more wealth creators in 2020.
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