MUMBAI: The mood on Dalal Street seems cautious at the start of the New Year after a sizzling run in the stock market in 2014. With the pace of implementing pro-market measures by the government turning out to be far slower than what investors expected and concern over a likely slowdown in foreign portfolio inflows heightening, investors are bracing for moderate returns from the stock market in 2015.
Market participants are betting on an average 10-15% returns from stocks in the New Year after the 30% run-up in the Sensex in 2014. "I expect markets to deliver around 10-15% return in 2015 in rupee terms, which is going to be far less compared with 2014, while in dollar terms, markets may not give any absolute return as I expect the rupee to weaken to the 70 mark against the US dollar," said Shankar Sharma, vicechairman and joint managing director of First Global Group.
The stock market slump in December has contributed in a big way in tempering returns expectations in 2015. Sensex dropped 4.5% in December, its biggest monthly decline in about two years, while many front-line stocks nosedived up to 15%. As a senior fund manager puts it, the correction has brought several investors back to reality.
"Investors will now have to do a reality check as the euphoria of a bull market is behind us. One should not make the mistake of expecting a repeat of last year's stock performance in 2015 as we have already seen a slew of earnings downgrades with macro indicators still remaining weak. It's time to play the truth and not live in fantasy," said Tirthankar Patnaik, chief strategist and head of research, India, Mizuho Bank.
"Investment reforms such as labour, land and power reforms may take longer and may be implemented only by progressive states if the central government is unable to pass them because of its minority position in the upper house of Parliament," said Sanjeev Prasad, senior executive director & co head - strategy at Kotak Institutional Equities. "Market returns may moderate to 15-20% given the expensive valuations on FY2016 basis after rerating of large stocks in 2014."
Brokers said foreign fund inflows could slow if a possible signal by the US Federal Reserve on interest rate hike results in the dollar strengthening further. Foreign portfolio investments in Indian stocks in 2014 fell to a three year low at $16 billion against the two-year average of $22 billion.
