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  • 5 things to watch out for in Samvat 2072

    Last year, Diwali started on a firm note, continuing its previous winning streak. Since then, it has been a roller-coaster ride. The economy failed to pick up steam as much as expected; corporate profitability still remained muted, and investments are yet to pick up. There were positives too—fiscal and current account deficits narrowed and the RBI cut rates following the downtrend in inflation. That said, the year 2071 has been a watershed year for the markets. The Sensex gave up almost all of its gains to return just about 1%, as of November 5.

    As we start the new Samvat year, investors and experts alike are very bullish. Domestic investors have poured in money into the stock market this year, often overtaking foreign investors for the first time in many years.

    Returns in the new Samvat year depend on these five important factors. Here’s a look

  • A lot depends on reforms

    Markets have been relying on reforms for a few years now. Analysts expect the Sensex to give about 20% returns in this Samvat year. This, however, depends on the passage of key reforms measures like the passage of the Goods and Services Tax (GST) Bill, clarity on land and labour rules, and so on. This is very important for investor sentiment.

  • Corporate profitability

    Earnings have continued to remain poor throughout the year, far underperforming the growth in the economy. Of 161 companies on the BSE 500 that had reported earnings for the quarter to September 2015, 108 missed analyst estimates for sales, according to a Mint report. This has forced many analysts to downgrade earnings estimates for the coming year too. However, with the fall in inflation, demand could improve going forward. This, in turn, could help profit growth. Many stocks have risen this year in expectation of this growth.

  • Manufacturing, investments to pick up

    Growth of manufacturing and industrial output has not picked up speed. In fact, October PMI data suggests production fell to a 22-month low. Companies too have not planned investments or expansions. Growth in investments has been meagre. Both manufacturing and investments need to pick up. Without either, the economy cannot get back on the high-growth path. The good news is that the government continues to invest in productive areas like infrastructure. This could help set the path for future corporate investment.

  • Monsoon, demand and inflation

    For the past two years, the monsoon has played spoilsport. This year, rainfall was less than average, affecting agriculture productivity. This, in turn, has affected rural demand and inflation. In fact, data suggests there is a vast difference between rural and urban inflation. Prices are still rising in rural areas because of various factors like poor distribution. This affects demand further. Rural India is a big market for Indian companies. The monsoon next year would play a big role in the recovery of demand in rural areas.

  • Global raw material prices benign

    Analysts expect raw material prices to remain on the lower side in international markets in the coming year too, according to a FirstPost report. While this is good news for importers and the inflation scenario in India, it could affect commodity companies like steel makers.

    • After Samvat 2071 wash out, Sensex poised for a 20% upswing in 2072 Read more

    • Gold unlikely to outperform equities in Samvat 2072 Read more

  • 92.3%

    The last 10 Samvat years have seen a mixed bag of returns, thanks to the global financial crisis as well as the slowdown in the domestic economy. The year 2065 was the most profitable this last decade, with the Sensex returning a whopping 92.3%. Ironically, this was in 2008, just before the stock market crash in the US.