Samvat that singed most asset classes
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Samvat 2071, which will close by the end of trade today, was forgettable for equity investors and eminently forgettable for commodity investors, but memorable for the few who may have decided to bet on debt this past year.
Last October, Samvat 2071 kicked off with much optimism that the 26% gains seen across equities in the year prior will extend into this year. If the Mahurat trading session last Diwali was any indicator (which it is not), there were further gains to be made in equities. There was hope that reforms will continue, economic growth will pick up and, most importantly, earnings will start to pick up.
As the Samvat closes, there is pessimism on each of those counts. While the government has made clear its intention to push reforms, some are disappointed with the pace of these reforms. The economy, while strong in parts, is facing the brunt of a slowdown in rural markets. As for earnings—the less said the better.
All taken together, equities, as measured by the BSE Sensex, took away some loose change from your kitty this Samvat by giving you a negative return of 3.3%. Of course, you could have hit the jackpot if you invested in a winner like Ashok Leyland Ltd which has returned over 90%, or invested in a new listing like VRL Logistics Ltd which is up close to 80% compared to the price at which the company’s shares were issued. On the flip side, if you picked a lemon like Vedanta Ltd, Unitech Ltd or Jaiprakash Associates Ltd, then you are down 60% or more for the year.
If you are feeling glum lat those returns, chat with your commodity investor buddies and you might feel better.
The fall across commodities spared none. If you were an investor in MCX oil, you lost 44% of your invested capital this Samvat. Weak global demand amid strong supplies and a strong dollar took the steam out of that commodity. If you had picked a base metal like say MCX aluminium, the slowdown in China marked down your investment by about 18%.
And if you argued that years of easy monetary policy will create inflationary pressures and bring back interest in gold, you lost about 5% on that bet going by the price move on the MCX gold contract since the Samvat began.
Real estate doesn’t appear to have done much better for investors either, going by reports of unsold inventories piling up across major cities. A recent survey from industry association Assocham had pegged the fall in property prices across the National Capital Region at 25-30% over the past two years.
The investor with the winning hand this Samvat was the one who bet on debt. And they have the Reserve Bank of India (RBI) to thank for that. Rate cuts since January have helped bring down bond yields and pushed up prices. The 10-year benchmark bond yield is down 65 basis points since last Diwali, putting debt investors squarely ahead of the pack in Samvat 2071.