How market performed in 2015- Dalal Street, Rupee, Gold

Due to combination of local and global factors such as delay in pushing key reforms, slowdown in corporate earnings growth along with China jitters and concerns over US Federal Reserve rate hike, calendar year 2015 remained one of the most tough year for India's financial markets. 

Dalal Street

India's stock market ran out of steam in calendar 2015 after rallying about 30 percent in the previous calendar, weighed down by both global as well as local factors.

The BSE Sensex has declined 5.02 percent so far this year and yielded a negative return for the first time since 2011 when the 30-share gauge fell more than 24 percent. In 2012, the Sensex returned 25.7 percent, followed by 9 percent in 2013 and a stunning 30 percent in 2014.

A combination of local factors such as a delay in pushing key reforms such as GST and land reforms along with a slowdown in corporate earnings growth weighed on markets. Year 2014 saw PE expansion on Modi euphoria, but as earnings failed to catch up, it resulted in a correction in 2015.

On the global front, China jitters, concerns over US Federal Reserve rate hike, a slowdown in the global economy, falling commodity prices and a rising dollar weighed on markets across the globe, including India.

Overseas investors have pulled more than USD 1.5 billion from the Indian market in November, due to lacklustre quarterly earnings and concerns over a possible rate hike by the US Fed.

Currency Market (Indian Rupee)

The rupee has been one of the better performing emerging market (EM) currencies in 2015. Most EM currencies saw significant depreciation this year: Brazilian real (45 percent), Turkish lira (24 percent) and Russian rouble (10 percent), whereas the rupee fell only 5.6 percent.

The rupee’s outperformance reflects India’s better macroeconomic prospects vis-à-vis other EM economies.

The decline in commodity prices, which has affected most EMs negatively, has been one of the key factors in positively transforming India’s trade and current account and also in improving its inflation and fiscal situation.

In summary, the improved confidence in domestic economy, a manageable CAD and the FII debt limit hikes should support the currency in the medium term. However, in the near term, rupee is likely to be guided by the Fed’s actions and could move towards 67-67.50  range.

Bullion Market (Gold)

It seems another weak calendar year for gold and third in a row as the prices of the yellow metal fell 5 percent in 2015 till December 2. Gold prices plunged 9.3 percent and 4.5 percent in 2014 and 2013, respectively. The metal gained 12 percent in 2012.

In the ongoing calendar year, gold prices in the spot market fell from Rs 26,539 per 10 grams on January 2, 2015 to Rs 25,235 per 10 grams on December 1. During the year, it touched a high of Rs 28,168 per 10 grams on January 21 and low of Rs 24,562 per 10 grams on August 6.

In the international markets, gold slumped to a near-six-year low on Thursday after comments from Federal Reserve chair Janet Yellen virtually cemented the case for a US rate hike this month, while the strength in the dollar also pressured the metal. Spot gold fell 0.2 per cent to USD 1,051.26 an ounce.

According to market experts, gold prices are surrounded by a complex set of factors ranging from the uncertainty of rate hike by the US Federal Reserve, low investment and physical demand, ECB decision to losen its monetary programme for growth in the Euro-blo.

While, growth and optimism in the US economy will lead to a stronger dollar and exert downside pressure on commodities including gold. We believe gold prices in the international markets can go lower towards USD 1,000 mark while MCX gold prices can possibly head lower towards Rs 24,000 mark.