As the financial year 2017-18 draws to a close, stocks and most equity-focussed mutual fund categories have kept their ‘growth’ promise, debt stuck to stable returns, gold shone bright thanks to an upturn in the last few months, but money betting on the Indian rupee versus US dollar drew a naught, shows a DNA Money analysis of asset-classes. If it was not for the volatility and losses in the last three months, returns in equities and equity-linked products would have been greater by up to 9-10%.

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Equities

In the equity market, the Sensex closed near the 33000 peak and the Nifty defended its 10000 zone to end fiscal 2018 with 12.8% and 11.9% returns in the last one year. Smallcap stocks, which carry more risk, rewarded investors with 17.3% index returns, higher than 13.1% jump in midcaps and 10.2% in largecaps. In terms of BSE sectors, consumer durables was the best performer in FY18 delivering a category average of nearly 45%, followed closely by Realty (40.4%).

The third-placed consumer discretionary goods & services clocked 20.2% return, followed by information technology stocks with an average 18% gain, chiefly because of the high-volatility seen in the past 2-3 months that forced investors to seek haven in defensives.

That did not help healthcare and pharma stocks mark any turnaround, as the sector ended FY18 with a 14% loss.

Going back to gainers, Telecom, FMCG, Banks, Finance, Energy, Metal, and Basic Materials generated 10-16% gains. Utilities (2.5%), Oil & Gas (6.9%), Industrials (7.1%), Capital Goods (8.7%), and Auto (9%) did not surpass double-digit growth. 

Apart from pharma & healthcare, power sector was the only other sectoral loser with a category loss of 6%.

Sandeep Chordia, vice president, research and data analytics, Kotak Securities, said, “FY18 has largely been a very good year for the equity markets. In addition to the foreign fund flows, the rally in Indian equities in FY18 has been led by strong liquidity support from the domestic investors. Domestic flows into mutual funds rose to $20.5 billion in FY18 as compared to $7.6 billion in FY17.” 

Mutual funds

In the mutual fund space, a strong performance by equities in FY18 helped equity funds notch up great returns. Value Research data shows that among those categories registering double-digit gains are technology funds that gained over 30%, followed by smallcap funds (19.6%), infrastructure funds (18.4%), midcap funds (16.3%), tax-saving funds (16.2%), multicap funds (15.7%), international funds (13.5%), largecap funds (13%) and banking funds (11.2%). Pharma funds, however, lost about 4% for the year.

Smart money is betting on largecap funds in fiscal 2019. Reliance MF deputy CIO Sailesh Raj Bhan, who oversees Rs 22,000 crore, said: “A favourable earnings growth scenario for the broader markets this year, coupled with the low base effect of the previous year will fuel the markets upwards. Given the growth expectations and macroeconomic factors, large-cap companies offer a better opportunity on a risk-reward basis compared to other pockets in the markets. Given the large size of such companies, they are more likely to absorb minor hiccups in the market and benefit from broader economic recovery which was also visible in the third-quarter results. With the recent correction of close to 8% in the large-cap indices, this space has become more attractive from a three year investment time frame.”

Debt & fixed income

Hybrid category of funds, including balanced funds, arbitrage funds and asset allocation funds, delivered 6-11% category average. In the fixed income MF space, credit opportunities were the top performer with 7.6%, followed by ultra short term funds (6.95%) and liquid funds (6.7%). Medium & long-term gilt funds were the poorest performers with 3.4% meagre returns. Debt fixed maturity plans, gaining popularity of late, have clocked 6.8% returns, which is better than returns offer by bank deposits.

In the pure debt asset category, government securities (G-Sec) in terms of yield had a roller-coaster ride. From 6.8% levels in mid-August, 10-year G-Sec yield hit 7.7%, but mellowed down to end FY18 at 7.4% after the government announced a rejig in its borrowing programme just recently. Many experts feel that the benchmark 10-year paper will likely trade in 7.20-7.50% range in 1HFY19. “...we are sceptical that the tinkering of the borrowing schedule (kicking the can down the road) would have a lasting impact on bonds. Yields might find support beyond a fall in the near-term,” says Radhika Rao, India Economist, DBS Bank.

Non-convertible debenture issues floated by private sector firms came in at attractive above-market rates. Besides, structured hybrid products that are linked to Nifty did well because of the good showing by equity markets.

Gold, rupee, realty

In the alternative space, the domestic price of gold delivered 6.2% returns in the last year, mainly due to the last few weeks of global volatility triggered by trade war, equity market valuation concerns and political uncertainty. Indian gold investors had faced some challenges last year apart from the various global elements.

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Changing tax regime and tighter regulation around jewellery transactions has a huge bearing on bullion market as well as investors. Introduction of 3% GST since the beginning of July 2017 was the contributing factor. The government had planned to bring the jewellery industry under the PMLA umbrella in August but later exempted it.

Source: DNA Money