Markets 2016

Sensex closed the year with 2% gain at 26,626 points with metals, basic materials and oil & gas stocks leading the charge, while telecom, pharma and IT stocks pulling down major indices. It was a slightly better year for nifty on NSE which closed 3% higher at 8,186.

The year started with the meltdown in China due to a series of negative economic news, which was followed by a sharp slide in the sensex on the Budget day . However, after that it saw a seven-month rally to a peak of 29,077. Then sensex was range-bound as volatility across global markets took its toll. 2016 will be remembered as one of those years when markets proved almost every expert wrong. It also witnessed several unprecedented events. First was Brexit, which was predicted by very few. As most analysts expected the markets to go down after Brexit, it did exactly the opposite and leading global indices picked up gains.

The next unprecedented event was the US presidential election win by Donald Trump at a time when every pollster and analyst had predicted a win by Hillary Clinton.
Again, analysts said markets will go south but it went north with Dow Jones index almost touching a never-seen before level of 20,000. Demonetisation was another which no one expected. This one, however, weighed on investor sentiment and market witnessed several volatile sessions as brokers, analysts and economists tried to fathom the impact of the government move on the economy and the market.

Compared to 2015, the year turned out to be a better year in terms of foreign fund flows into stocks but worse for the bond market. In 2016, FPIs (foreign portfolio investors) net bought stocks worth about Rs.20,600 crore, compared to Rs.17,800 crore the previous year.In the bond market, net selling was over Rs.43,600 crore compared to a net buying figure of Rs.45,600 crore in 2015.

The year witnessed retail investors continuing to demonstrate relative maturity with investments through the mutual fund route. Despite several phases of extreme volatility, retail investors didn't rush to redeem their investments in any major way . In addition, investments through the systematic investment plans (SIPs) rose steadily through months. Latest data from Sebi showed that till December 27, mutual funds had net pumped in over Rs.44,400 crore, compared to about Rs.72,200 crore in 2015 and Rs.24,000 crore in 2014.

In the bond market, helped by RBI's decision to cut rates as inflation cooled, and also helped by easy liquidity , the benchmark 10-year gilt yield fell sharply from 7.47% at the start of the year to 6.1% in early November. However, as RBI tightened liquidity as there was a deluge of bank deposits post demonetisation, the gilt prices rose sharply to close the year at 6.51%.

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