Riding high on expectations relating to the country's government -first about a change and then about its performance -Dalal Street investors took both the sensex and the nifty to record-high levels several times during 2014, and added about 30% to each of the benchmark indices. This was the best year for both the indices in the last five years as foreign investors pumped over $16.1 billion (about Rs.97,000 crore) into stocks, and mutual funds witnessed return of retail investors, although at a slower pace.
The starting point of the year-long rally is considered to be in September 2013 when Narendra Modi was nominated as BJP's prime ministerial candidate. The rally spilled over to 2014 as a BJPled government emerged as the best alternative to a UPA-led government, which was seen in a phase of policy paralysis for over two years.
The year started with the sensex at 21,171. It scaled the 25K mark the day the Lok Sabha results were announced, which brought in a BJP-led government at the Centre with a thumping majority. After scaling the 28K mark in early November, the sensex ended the year at 27,499 -a gain of a little over 6,300 points.
Compared to the large cap stocks, the year was even better for mid and small-cap stocks with BSE's mid-cap index gaining nearly 55% and the small-cap index 69%.Market analysts said one of the reasons for this stellar performance by smaller companies was the increasing interest for these stocks among foreign investors. In most of the large-cap stocks, foreign investment holdings are near the permissible limits and, hence, a large number of foreign funds entering India are looking at mid and small stocks.
The strong rally on Dalal Street also made investors richer by Rs.28 lakh crore with BSE's market capitalization now at Rs.98.2 lakh crore. In between, in early December, BSE's market cap had also scaled the psychologically important Rs.100 lakh-crore mark.
Despite rising bad loans, banking stocks, especially the private sector ones, were the best performers, along with pharma and auto. On the other hand, metal and energy stocks were among the top laggards.
Among the sensex shares, private sector lender Axis Bank nearly doubled, while leading car maker Maruti gained about 89%. Tata Power, down 6.8% on the year, was the top loser among sensex stocks.
Going forward, analysts expect the government has the conviction and the ability to take its economic reforms agenda forward, which in turn will further drive the current bull rally in the market.
High expectations from the Modi-led government have also prompted top broking houses to predict sensex targets as high as 33,500 in the next one year as foreign investors pour more money into Indian stocks. Market players will also look to the RBI to lower interest rates that can help spur growth although, currently , the central bank is treading cautiously on this front.
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