Volatility returned with a bang in the last quarter of 2018 as different areas of global markets suffered from below average returns due to extraordinary domestic and global conditions.
This in turn raises a pertinent question.
Will FOMO (fear of missing out) drive investor behaviour in 2019?
The Indian equity market witnessed slow growth in the last quarter of 2018-19. The Sensex hit an all time high during the year 2018 only to decline at the end averaging around 5.9%. However the good news is the Indian markets did better than the global markets, SIP inflows rose 20% in 2018 and domestic investors remained bullish.
Given the projections forecasted for fiscal year 2019, India’s stock market and NIFTY 50 will continue to trade above 10,800 points thereby will remain bullish in 2019.
Like equities, the debt market hit a high of 8.18% before declining to 7.3% levels. With the unexpected resignation of Dr. Urijit Patel, and appointment of Mr Shaktikanta Das as the new RBI governor, will the RBI oblige the government ? The fall in international crude oil prices has relieved pressures on the rupee. Now, only a sudden depreciation of the rupee followed by trade wars can have any impact investor sentiment. One does not expect to see a rate cut anytime soon.
With inflation down in 2018 the RBI is likely to keep the markets in its comfort zone.
Two factors: more specifically fear of US China trade war and US Iran tensions boosted prospects for gold while strengthening dollar and interest rate hikes pushed them down. Since both factors got neutralized , international gold remained within a narrow range. Domestic gold prices generated small positive returns due to fall in rupee. Investors can expect similar returns in 2019. However one should not put a large fraction of their deposits in gold (ideally only 5 to 10%) .Also one can expect to trade in gold bonds that provide a fixed return of 2.5 to 2.75%.
For Real Estate 2017 was a crisis year. The situation improved in 2018 . However, it got sucked into the vortex of trouble in the last quarter of 2018- first in the form of liquidity crunch due to the IL&FS crisis and second due to change in GST rules. The change in GST rules however, bodes well for consumers. As per the change, all properties that don’t possess a completion certificate for the property will be treat as ‘ under construction’ and therefore liable to pay GST. The GST rules , more specifically put pressure on the developers . They will now push to complete their projects so that properties become GST free. If one plans to buy a house for investment purposes it is advised that one stays away . Possibility of price appreciation is low because of volumes of unsold housing stock. Another reason behind expected sluggish growth in 2019 is the impact of RERA and affordable housing under PMAY. This will bring more transparency and accountability into the real estate sector with larger players driving growth through consolidation. All these factors might lead to a slowdown on the supply side over the next few months.
On the demand front the end user demand for residential real estate will continue to be sluggish over 2019.The demand for residential and commercial real estate should stay on course with the onset of REIT listings.
TO SUM IT ALL
India’s macroeconomic fundamentals have improved significantly over the past 5 years. This in turn is inspiring confidence in the India Story.It’s been a lot of hard work over the last 5 years to improve India’s macro fundamentals and transition from a fragile economy to a stable economy with strong growth prospects. Keep strong and keep growing India!