New Delhi: According to a report by the Motilal Oswal Financial Services Ltd. the fiscal year 2009 is the worst year since the fiscal year 1980 as the markets fell 36% and the inflation declined to its 30-year low.
And the most sectors are expected to report a fall in their earnings and the inflation is expected to turn negative for the next six months, the report said.
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The Bombay Stock Exchange’s sensitive index or Sensex has declined 36% in FY09, making it the 2nd worst year for stock markets in the last three decades. The key negatives that drove markets down were weakness in global financial markets, recession in the domestic economy, tight monetary policy in first half of FY09, and heavy selling by FIIs (foreign institutional investors), the report said.
All these factors contributed to a series of downfall in the corporate sector earnings. Another highlight of the FY09 has been 27% depreciation in the value of rupee versus the US dollar, which has also had a negative impact on earnings.
The report also said that the MOSL Universe (comprising 117 companies) excluding oil refining & marketing companies (RMCs) are expected to report 1.5% YoY decline in sales, 11.8% YoY decline in Ebitda (Earnings Before Interest, Taxes, Depreciation and Amortization) and 19.3% YoY decline in net profit in 4Q FY09.
In first quarter of the FY10, the most important event for the markets would be the Lok Sabha elections. As the market reaction was very adverse to the unexpected outcome of the general elections in May 2004.
After an above-average growth of 8-9% since FY03, the GDP (gross domestic product) growth for FY09 is likely to decline to 6.7% on strong global headwinds and rub-off impact on the Indian economy. The estimated real GDP growth of 6.7% in FY09 is still better than the other economies and is led by strong domestic consumption, the report said.
The FY09 has witnessed a high inflation of 12.9%, and subsequently, a 30-year low of 0.27% in the latest weekly data. According to the report the two key drivers of this inflation were prices of base metals and oil, which have declined sharply in the last six months.
It also expects the inflation to turn negative for the next six months and a deflationary environment would be conducive for both the Reserve Bank of India (RBI) and the government to pursue more measures to stimulate growth.