Stock markets are expected to take a decisive turn in 2016 giving lucrative returns to equity investors. Analysts attribute three major reasons for this turnaround. They say that the impact of the ongoing reforms would start showing its result on the ground thereby bringing the expected turnaround in the economy. The improvement in the business sentiment is going to strengthen further in the New Year. The second contributing factor which is expected to take stock markets higher is the government’s sincere efforts to address the NPAs issue being faced by the public sector banks. This would facilitate the ease of doing business especially for smaller businesses which depend on banks for their funding needs. And the “third important factor would be the passage of the GST, around June 2016, which would trigger a positive sentiment and take stock markets to soaring heights,” says Deepak Kapoor, financial analyst, ADC Legal.
2015 has been a disappointing year for stock investors with the Sensex — the benchmark index of India’s blue-chip stocks — giving a minus 6% return. “A significant gap between popular expectations and delivery on the political front and continued weak performance of corporate India led to a weak year for equities,” says Nilesh Shetty, associate fund manager-equity, Quantum Mutual Fund. However, with things improving, albeit gradually, and “the ongoing corrections in the stock markets, this could be the best time to make investments in equities especially for people looking to build long term portfolios,” says Shetty. He hopes that the Indian retail investors continue to allocate a portion of their savings to Indian equities ignoring near term volatility being witnessed in Indian stock markets.
Retail investors who have made a huge comeback in equity markets (through the mutual fund route) are expected to strengthen their positions further in 2016. Domestic mutual funds have bought shares worth $10 billion in 2015. With real estate and gold losing its charms for the broader investing community, the equity and debt markets are expected to experience more liquidity. The efforts of capital markets regulator SEBI to make financial instruments more acceptable to investors, especially for retail investors, are expected to increase retail participation in financial products that includes equities. As more funds come into financial products, it would provide a much needed capital for the businesses to start investments.
Moreover, Kapoor feels that the forthcoming budget is expected to give more incentives to private investment to start the investment cycle which is needed to create jobs in the economy. Experts say that without private investment, no amount of government spending can kick-start the economy.